Buying or selling a home? Consider Capital Gains
Carla Christian
50plus Magazine
AFTER 50, MANY ARE READY to swap their larger or two-story home for a smaller abode better suited to aging in place. Some seek to free up home equity to bolster retirement funds; others want to make the leap into a dream home or milder climate, or to move into the comfort of support and amenities found in a senior community.
Whatever your reasons, there are unique considerations when buying or selling a home after 50.
When SELLING
If you’ve owned your home for many years, it’s likely worth much more than when you bought it. When you sell, your profit is called capital gains, and you may owe taxes on part of it.
For example, an unmarried person pays no capital gains tax on the first $250,000 of profit; for couples, the exemption is $500,000. Taxes can be further reduced by saving receipts for major improvements like new heating, windows, and even landscaping.
Extra costs can arise due to a Medicare provision dubbed “IRMAA,” the Income-Related Monthly Adjustment Amount. Added income from your home sale could increase your Medicare premiums two years later.
Selling your home can also impact your eligibility for Medicaid. Typically, the value of your primary home isn’t counted among your assets, allowing you to stay in your home if you deplete your savings and receive Medicaid benefits. Once you sell your home, however, the money you receive could affect your eligibility.
You or your realtor can ask a title company to check your title for any loose ends. For example, if your spouse passed away but their name is still on the title, it could delay, or even derail, a sale.
When BUYING
Consider your estate plan when purchasing a new home. You may want to hold title in a trust or other device to ensure your plans are carried out and that transfer of ownership is simplified.
While moving in your 20s was exciting and friends helped in exchange for pizza and beer, nowadays, not so much. Moving is a huge, emotionally charged undertaking. For those with other challenges, like caring for a partner or aging parent, or coping with an illness themselves, it’s even harder. Consider whether the timing is right, whether needed help is in place, and whether you’re prepared for the process.
Finally, if choosing a new home that will meet your needs as you age, assess the cost of tasks you may not want or be able to do yourself, such as tending the garden or painting the walls. Consider whether doorways and thresholds will allow a mobility device should that need arise. Look for nearby quality healthcare, and transportation options should it be needed.
Buying or selling a home is both daunting and exhilarating at any age. Ensure you’re prepared and your needs will be met by considering the factors for your stage of life.