Business Insider reported that 71-year-old Joel Friedman and his wife, Kathryn Friedman, who live in Southern California, had originally planned to downsize, selling their 5,000-square-foot home and moving to a mature residential development restricted to those 55 and older. However, after learning that President Trump was considering eliminating the capital gains tax on home sales, they postponed the sale, citing the potential tax savings of $700,000.
The report notes that a growing number of elderly homeowners, like Friedman, who have long entered the empty-nest stage, are postponing the sale of their large homes while awaiting Congressional legislation to eliminate the capital gains tax. Real estate economists say this wait-and-see attitude among older homeowners is exacerbating the shortage of family-sized homes in the housing market, particularly in expensive states like California.
Since 1997, couples filing jointly have been subject to a capital gains tax of up to 20% on home sales profits exceeding $500,000, and individuals filing individually have been subject to capital gains taxes. Despite rising inflation and record-breaking home prices, the capital gains tax threshold has remained unchanged since 1997, leaving home sellers facing an increased tax burden.
Feldman says he doesn’t really need a larger home these days, and maintenance costs are increasing. “We have a million reasons to move, but we haven’t because the tax burden is too high,” he says.
In 1990, Feldman spent $1.8 million on the land, building the house, and renovating it. Over the past 30 years, the value of the California home has increased significantly. In May of this year, Feldman and his wife put the house on the market for $4.5 million. However, media reports suggested a potential elimination of the capital gains tax, and Republican Georgia Representative Marjorie Taylor Greene introduced a bill in early July. Feldman allowed the house’s listing to expire and temporarily scrapped the sale plan, hoping legislation would be passed next year.
Federman said that if the house is sold for $4.5 million, according to current tax-free deductions, about $2 million will be subject to federal and state capital gains tax, and net investment tax will also be paid, for a total tax of about $700,000.
