71-year-old retirees Joel and Kathryn Friedman face a common dilemma: high capital gains taxes are preventing them from downsizing their Southern California home and moving to a 55+ community. Their five-bedroom, 5,000-square-foot house is too large, but the potential $700,000 tax burden on their nearly $4.5 million sale price is a significant obstacle. This situation highlights the impact of outdated capital gains tax thresholds on the housing market and the growing number of older homeowners delaying downsizing
Southern California Empty-Nesters Face $700,000 Capital Gains Tax Bill, Delaying Downsizing and Exacerbating Housing Shortages. This 5,000-square-foot, five-bedroom home's sale is stalled by a significant capital gains tax burden, highlighting the impact of outdated tax laws on the housing market
Facing a hefty capital gains tax on home sales? Since 1997, the $500,000 (married) and $250,000 (single) thresholds for a 20% capital gains tax on home sale profits haven't changed, despite inflation and rising home prices. This outdated law impacts more homeowners than ever, creating a housing shortage and discouraging downsizing. Learn how this affects you and the potential for legislative changes
Soaring capital gains taxes are preventing many older homeowners, like the Friedmans, from downsizing. This tax, unchanged since 1997, now impacts a significantly larger number of sellers due to inflation and rising home prices, exacerbating the shortage of family-sized homes, particularly in high-cost areas such as California. The resulting reluctance to sell creates a housing market bottleneck, impacting both sellers burdened by high tax liabilities and buyers seeking larger homes
High capital gains taxes are preventing many older homeowners, like 71-year-old Joel Friedman, from downsizing. His five-bedroom, 5,000-square-foot Southern California home is too large and costly to maintain, yet the substantial tax burden—estimated at $700,000—prevents him and his wife from selling and moving to a 55+ community. This situation, impacting numerous older Americans, contributes to the current housing shortage, particularly in high-cost areas. Proposed legislative changes, including raising the capital gains tax threshold or even elimination, offer a potential solution
Could a capital gains tax change boost stagnant home sales? Bipartisan Congressional support is growing to raise the federal tax threshold on capital gains from home sales, potentially easing the burden on older homeowners like the Friedmans. President Trump has even suggested eliminating the levy entirely, offering a glimmer of hope for sellers facing significant tax liabilities on their biggest asset
Facing substantial capital gains taxes on their $4.5 million Southern California home, the Friedmans listed their five-bedroom property in May. However, July brought renewed hope with potential federal tax law changes in Washington, impacting their downsizing plans
Could eliminating capital gains taxes on home sales revive the housing market? Following Rep. Marjorie Taylor Greene's bill to eliminate the federal capital gains tax on home sales, President Trump voiced support, suggesting it could boost a sluggish market hampered by high interest rates. This comes as many older homeowners, like the Friedmans facing a potential $700,000 tax bill, are delaying downsizing due to the current $500,000/$250,000 capital gains tax threshold, exacerbating housing shortages. Bipartisan support for raising this threshold or eliminating the tax entirely offers hope for homeowners and the market
Facing significant capital gains taxes, the Friedmans are temporarily withdrawing their $4.5 million Southern California home from the market. Hoping for legislative changes—like the proposed increase or elimination of the capital gains tax threshold—they plan to relist in the future, aiming to downsize to a 55+ community
High capital gains taxes are discouraging homeowners like Joel and Kathryn Friedman from selling their homes, exacerbating housing shortages. With current tax laws, selling their large home would trigger significant capital gains taxes, making them hesitant to downsize, even though they're ready to move. This situation incentivizes those already on the market to withdraw their listings, further constricting housing supply. Potential legislative changes, including raising the capital gains tax threshold or eliminating it entirely, could alleviate this issue and encourage more family-sized homes to enter the market
Built in 1990, this Southern California home reflects significant appreciation, showcasing the area's robust real estate market. The five-bedroom, 5,000-square-foot property presents a compelling investment opportunity, though potential buyers should be aware of capital gains tax implications
Facing a potential $700,000 capital gains tax bill on their $4.5 million Southern California home sale, retired couple Joel and Kathryn Friedman illustrate the challenges older homeowners face. After investing $1.8 million over three decades in building and improving their five-bedroom property, they estimate a $2 million profit subject to federal and state capital gains taxes, plus a net investment tax. This hefty tax burden—including over $400,000 in federal and over $200,000 in state taxes—is delaying their much-needed downsizing to a 55+ community. Their story highlights the impact of the stagnant capital gains tax threshold on the housing market
Facing a potential $800,000 combined state and federal tax bill on their Southern California home sale, 71-year-old retirees Joel and Kathryn Friedman highlight the challenges of capital gains taxes for older homeowners. This hefty tax burden, estimated by Evan Liddiard, Director of Federal Tax Policy at the National Association of Realtors and a CPA, is preventing many from downsizing, exacerbating housing shortages. With bipartisan support for raising the capital gains tax threshold, could this be a solution to unlock the stagnant housing market?
Facing substantial capital gains taxes on their $4.5 million Southern California home sale, 71-year-old retirees Joel and Kathryn Friedman worry their retirement income—Social Security and a pension—won't cover healthcare and long-term care costs. They need the home sale proceeds to fund their retirement comfortably, but the high tax burden delays their planned move to a 55+ community
Facing a hefty $700,000 capital gains tax on their Southern California home sale, retired couple Joel and Kathryn Friedman were hesitant to downsize. While not destitute, the substantial tax burden—a common issue for many older homeowners—delayed their move to a 55+ community. With bipartisan support in Congress to raise the capital gains tax threshold, the Friedmans, along with many others, await potential tax relief to finally sell their five-bedroom home and access much-needed funds
Over the last several years, the effort to reform the tax on home sales has been led by a Democrat. California Rep. Jimmy Panetta first introduced a bill in 2022 that would double the tax exclusion to $500,000 for individuals and $1 million for joint-filing couples and index it to inflation.
It’s unclear whether Congress will seriously consider Greene’s bill or move forward with Panetta’s legislation, which has bipartisan support. Liddiard is skeptical that lawmakers would support eliminating the tax entirely, but he argued that Panetta’s bill “would solve most of the problem” by dramatically shrinking the number of home sellers who’d be subject to the tax.
Liddiard said eliminating the capital gains tax or raising the exclusion threshold “is not a cure-all” for housing market woes, but would have a significant positive impact on inventory and affordability.
He argued that reducing the tax burden would mean more homes would hit the market, raising supply and lowering home prices. NAR has been lobbying to reduce the capital gains tax burden on home sellers for years.
But the proposed changes to the tax would disproportionately benefit homeowners in states, like California, that have the country’s most expensive housing markets. They would also tend to help wealthier homeowners who are lucky enough to be sitting on significant home equity.
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