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.
If you can’t afford to sell your house lease it out and start transferring the equity to your kids as fast as you can without taking too big a hit on inheritance tax. Use the income to buy a smaller house in a less posh neighborhood.
And thus the cycle of nobody buying homes to live in continues.
That’s a policy issue. A progressive tax on non- self occupied residences would go a long way to fix that.
Lower the tax on primary residences. After that have a tax rate that increases per unit until at some point like 20 or so the taxes exceed the value of the property. End corporate landlords.