Boomer couple struggles with capital gains tax on home sale

Joel and Kathryn Friedman confront a $700,000 tax burden as they plan to downsize.

Boomer couple faces heavy capital gains tax while trying to sell their home

Joel and Kathryn Friedman, both 71, are caught in a challenging situation as they attempt to sell their Southern California home. The couple is eager to downsize into a 55-plus community but faces an estimated capital gains tax of at least $700,000 due to profits from selling their property. This significant financial hurdle is largely a result of tax thresholds that have not changed since 1997, meaning that inflation and surging home prices have pushed more homeowners like the Friedmans into tax obligations. With growing bipartisan support in Congress for potential reforms, including raising the federal tax exclusion, the Friedmans’ hope is that upcoming legislative changes might alleviate their tax burden. Until then, they are pausing their sale plans, which reflects a broader trend among older homeowners who are hesitant to sell in the current tax environment.

The case of the Friedmans underscores a critical tension in the housing market. Many older homeowners are prepared to move but are deterred by steep capital gains taxes. This situation points to a larger issue of housing inventory shortages, particularly in high-value markets like California. Economic experts argue that adjusting these tax regulations could unlock homes that are currently off the market, potentially easing some pressures on housing price inflation. However, critics contend that such reforms may disproportionately favor wealthier homeowners, further complicating the issue of housing affordability for average buyers.

Highlights

With potential legislative changes on the horizon, the future remains uncertain for many homeowners planning to sell.