After 33 years and four children, Baby Boomers Marta and Octavian Dragos say they feel trapped in what was once their dream home in El Cerrito, California.
Both over 70, the Dragos are empty nesters, and like many of their generation, they’re trying to figure out how to downsize from their 3,000-square-foot, five-bedroom home.
“We are here in a huge house with no family nearby, trying to make a wise decision, both financially and for our well-being,” said Dragos, a retired teacher.
But selling and downsizing isn’t easy, appealing or even financially advantageous for many homeowners like the Dragos family.
Many Boomers whose homes have surged in value now face massive capital gains tax bills when they sell. This is a kind of tax on the profit you make when selling an investment or an asset, like a home, that has increased in value.
Plus, smaller homes or apartments in the neighborhoods they’ve come to love are rare. And with current prices and mortgage rates so high, there is often a negligible cost difference between their current home and a smaller one.
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Aww these poor Boomers just made too much money on their homes and now they have to pay some taxes if they want to sell for huge profits. Boo fucking hoo.
And with current prices and mortgage rates so high, there is often a negligible cost difference between their current home and a smaller one.
Is this accurate? I’m having a hard time believing it, but if it is true, then they need all cash to buy a smaller home. Downsizing shouldn’t be a money-losing proposition, otherwise there would be 0 interest in doing it.
The argument is that these people will sell their really large house then pay the same amount they earn on a smaller condo. This is going to be very much context dependent and frankly I don’t buy this as a problem for most people.
As you get older, you may no longer find it worth keeping up a larger house. It’s not just repairs, but furnishing and decorating and cleaning and insurance and taxes
Article is lying by omission
The only way they pay cap gains is if this is a second house
Also must be nice to be able to afford a 3000 sq ft home on a retired teachers salary…fuck these ppl honestly.
The only way they pay cap gains is if this is a second house
Not the only way. There are several different ways you might have to pay cap gains on a home that isn’t a second home.
But for the article its likely this way they have to pay:
“Both the IRS and FTB provide a capital gains tax break for home sellers who meet certain conditions. The maximum amount of capital gain that can be excluded is $250,000 for single filers or $500,000 for a married couple filing jointly.” source
From OPs article:
“The taxable gain of $1.4 million at 20% would mean those homeowners are facing a $280,000 tax bill. In a state like California with additional tax, the overall payment would be over $450,000.”
They bought the house at $100k, and are walking away after taxes with $1.55m. Boo hoo? They’re saying they get a big tax bill because of inflation, but they’re also able to sell their house for 19x what they bought if for for similar reasons. If they want to sell it to me for $600k and have zero cap gains taxes, I’ll take them up on that offer.
They also spent years reaping the lower taxes from prop 13 which saw their property taxes only raise by a max of 2% per year.
Such a sad story. We should start a Go Fund Me!
Here’s what I will contribute
^^^🎻
It’s truly an insane housing market, but can they even afford to downsize? I have no way of judging the cost there, but certainly here there is less than $450k difference between a typical house and a 2-3 bedroom condo. Since ts the land that scarce, smaller places go up in value along with the larger, so you never know.
In a much lower cost of living area, when my Mom downsized from the big house I grew up in, she both took a sizeable gain and yet still had to take a mortgage to buy a 2 bedroom condo to replace it
The rich always find someway to divide the working class and they fall for it every time.
Yeah no sympathy for large taxes on massive capital gains. Especially capital gains from the massive increase in housing costs
Seriously, wtf are they whining about. “If I subtract the money we paid from the current market value of our house we get such a nice number, but now we have to lose 14% of that 😭😭😭😭”
So they pay those taxes with the gains from the sale? What’s the fucking problem?
But unless this is a 2nd home, I don’t think they’ll pay anything unless it’s over some high amount.
If they’re in California, they might have gains of over a million dollars. The exemption cuts off at $500k of total gains; anything beyond that has to have taxes paid.
So they’re whining about paying taxes on a million dollar capital gain. They can go fuck themselves.
And? They are still taking home hundreds of thousands of dollars in cash.
Reminds me of when I was in college in business classes and some would make arguments that raising taxes would cause people not to open a business.
We used to argue around the idea that if someone opened a business, made a million dollars and stood to keep $600k of it rather than $700k of it, then somehow that still net profit means less profit therefore they won’t do it? Genius thought process some people have.
It reminds me of the people afraid to get a raise because they think going into the next tax bracket means they make less money.
Maybe they should just move to a lower cost of living area, away from where they’ve lived their whole life? You know, like they’ve been telling their kids and grandkids they need to do to make ends meet.
The entire argument comes down to “oh, those poor people, they have to pay their fair share of taxes on the huge amount of equity they’ve just earned”. Seriously, the bias is disgusting.
Equity isn’t money in your pocket, though, and just because the house is suddenly worth $1.5 million on paper doesn’t mean they have extra money to pay their tax bill.
I know lots of people are bitter about the housing market but I don’t think it’s the fault of people who bought a home and just want to live in it. The people (or corporations) who buy homes as investment properties or to flip them are probably more worthy of anger.
Don’t have the money to pay the tax bill? Show me that math.
You buy a house for 300k, sell for 700k, you made 500k, that’s 15% tax filed jointly on long-term property. But wait! There’s more! You get to exclude the first 250k if it’s your primary residence! So you’re paying 15% on 250k. $37,500. Which is substantially less than income taxes.
They just sold the house and (assuming it was paid off) have 700k (less realtors fees, etc.) and absolutely could pay the tax. Even if it wasn’t paid off, the capital gains would be reduced and they would owe less money. We’ve moved and sold 2 homes in the last 20 years, made capital gains on each sale, and paid the appropriate taxes because we aren’t idiots and didn’t piss the money away.
So tell me again how they don’t have the “extra money to pay their tax bill”?
They took the worse couple in the article. They have the house since the 90s. They will pocket a big fat check, and they are angry that they have to pay taxes on that.
Cry me a river.
The article is explicitly about capital gains. It’s not like they have to pay the tax before they sell it. Use the proceeds from selling to pay the tax. That’s the whole point.
I think you just argued against home ownership. The point in the equity is that it has a sustained value but is also non-fungible. The moment they sell the house, they will have all that cash to pay that tax bill. If they turn that equity into new equity (i.e sell one house and buy another) then they won’t pay a single cent unless their earnings are greater than $500,000.
Also the people in the article DO NOT WANT TO LIVE THERE ANYMORE but will not sell to a family who does want to live there because they don’t want to pay a little bit of taxes. And people wonder why everyone hates Boomers.
When they sell the asset, they need to pay the tax. Conveniently, at that point the sale provides the money from such the taxes should be paid.
A 3000 sqft house in CA? Going to guess they would be making a ton off that. Couple that with the years and years of property taxes being taxed at below the appraised value and I am going to say I don’t have much sympathy.
We bought our 1800 sqft house in Sacramento for almost 600k 2 years ago, when it was worth less than half that the last time it was appraised in 2008. We were at least fortunate enough to get a 30 year loan at 3.3% but we will NEVER see property taxes as low as many of our neighbors who have lived there for 20+ years.
My parents are selling their house in a couple of years in order to move closer to us. They’ll easily get over a million for it and then they’ll turn around and use that money to buy a house for 500k in cash. Yeah, they’ll take a hit in taxes but they will still have plenty left for buying the new house outright (so no mortgage), plus doing some additional renovations that my dad wants to do in order to have his dream kitchen.
It’s in a great area too. Could easily get 1.5 mil off it.
Oh, no, boomers have to pay taxes on the MASSIVE gains on their cheaply purchased houses now worth millions. Cry me a river.
They already get to exclude $250,000 of increase (or $500,000 if married filing jointly). So a married couple selling a house they bought for $50k and sold for $550,000 pays no taxes at all!
So boomers need to shut the hell up.
Someone needs to go take a few tax and accounting classes.
They were empty nesters 10 and 20 years ago too most likely. They got greedy and now they don’t want to pay tax on the absurd increase in value of their house?
Cry me a river. The only feelings this should spark in anybody reading it is anger and hatred. Greedy, repulsive people.
It’s fine to be frustrated with the housing market but it seems like you’re directing that frustration at these people as if they’re responsible for it and that’s not really the case. You’re making a lot of assumptions about their motivations that don’t seem fair to me. Get angry at real estate investors, lobbyists, and politicians, not two random people trying to sell their house.
The reason they’ve earned some frustration is not because they bought a house in SoCal the 90s. The reason they’ve earned some frustration is because after living in a house in SoCal for 33 years and raising four children in it, they felt like they wouldn’t earn “enough” money from reselling it. This feeling of entitlement was so strong that they complained to an international news corporation about it.
Even if they didn’t create the unjust system, they clearly benefit from it and will do whatever it takes to get what they consider to be their piece of the pie. They want the real estate system to work as designed-- because how else would they get their money?
The thing that really gets me is that one of them is a retired teacher. He dedicated his life to helping young people. He’s got to be educated enough to do some self-reflection. But this mindset that he has about real estate and profit is destroying the world for the same exact people he’s worked so hard to help.
The house is worth 2mil.
I’m not sure what point you’re trying to make, and I also checked the article and couldn’t find a source for that number
My point is millionaires should STFU and stop whining. Obv u disagree.
You vastly misunderstood what I was talking about. They are greedy. They want to realize those gains and not pay taxes. Greed. This has nothing to do with anything else. They were happy to see the value go up as high as possible until they realized they need to pay their fair share. I’m angry at them for being greedy.
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They got greedy by living in a house. Right .
Nope. They got greedy by staying in that house for as long as possible to maximize their gains, and by then bitching about taxes.
Try harder next time.
Whatever. They just don’t want to pay anything. Probably bitch about the real estate agent fees, too. They’re only trapped by their own greed.
Guess they are using the alternate definition of trapped. They of course could rent the house and use the rent money to rent/buy thier new place and probably have a little profit at the same time.
Ah yes, more landlords, that’s what society really needs!
They are suggesting that they rent out the empty rooms.
The only thing that really changes is issues are more likely to be dealt with quickly since they might affect the landlord as much as the tenant.
They’re happy to say that younger folks should be okay with it, but as soon as they’re faced with it, it’s suddenly a tragedy?
Horse shit. Fuck anyone gaslighting the value of housing security. I hope their home value turns to dust.
I will never tire of people showing us exactly what kind of people they are going to be when they grow up.
Most homeowners don’t have to pay capital gains on their home when they sell. Thanks to tax legislation from the ’90s, a gain of up to $250,000 for a single tax filer or $500,000 for a couple filing jointly is exempt from tax. That’s providing the sale is of the homeowner’s primary residence and that they meet other requirements such as living in the property for two of the past five years.
That means if a couple bought a median priced home in 1987 for $100,000 and they’ve lived there as their primary residence and are selling it today for $550,000, the $450,000 gain from that investment is not taxed because it falls under the $500,000 exclusion to capital gains taxes.
However, if those same $100,000 homebuyers lived for 37 years in an area that has seen enormous growth in home values — as is the case for many parts of California — and their home now sells for $2 million dollars, that’s nearly $1.9 million in profit, of which only $500,000 is excluded from taxes.
A normal.person would still be ecstatic…
Fuck boomers
Perhaps the real problem is here:
https://www.amortization.org/inflation/amount.php?year=1997&amount=250000
If the $250k exclusion was indexed for inflation, it would be nearly $500k now. I think it’s dumb that all tax-related things aren’t indexed for inflation. But I know why: if they did, then the forecasts on how much the exclusion would cost the Treasury would have been higher, and it never would have passed Newt Gingrich’s House
