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700k is 20% of 3.5 million
That leaves 2.8 million
If put into savings with a 4% annual interest rate, that is 112k per year
And they are complaining?
You fucking kidding me?
2.8 million dollars is more than most people have the ability to save for retirement in the first place.
They want us to cry for them because their payout from a single asset after tax is more than the average middle class retirement account?
Get fucking real, if anything this makes me think the capital gains tax is too low for their bracket.
Agreed... this couple isn't hurting either way.
However as they said the limit hasn't changed in almost 20 years. For most older people in America their home is the single most valuable possession and what many have to sell when they are unable to care for themselves and have to go into some kind of care facility. For people living in a HCOL area, their home can easily be many times more valuable than their savings and their primary or only asset of significant value, and a $1M house is a starter home.
It makes sense for the limits to be increased, but the couple that's the subject of this article doesn't deserve anyone getting teary-eyed.
Yeah that exemption always seemed pretty high, but as a newly single person (where the exemption is cut in half) in a high cost of living state where home prices have been rising excessively, and I’ve owned my home long enough to raise kids (and increase value a lot) ….. yeah it’s easier to see the other side. I’m ok but far from wealthy, and need to downsize in order to afford retiring, but would also be hit by capital gains.
Given what home prices have been doing and this exemption never changing, it’s no longer realistic. Now it’s not just the wealthy
I'm all for increasing the limit and also increasing the tax rate. Costs have gone up, period, but that doesn't mean rich schmucks shouldn't still be paying more
The first $500k is taxed at a lower rate, so they're actually making more than that on the sale.
Also at their age they could live on that money until they die. I hope an earthquake takes out the home making it worthless. Fucking greedy bastards. They are Fucking 71.
at my age i can live on that money until i die and i'm much younger.
Your home listed at...$4,500,000 is going to cost you $700,000 in taxes? Cry me a river straight to the bank with your remaining $3,800,000. I hope they raise the tax.
Plus they're in their 70's. Pretty sure 3.8 mil will last you the rest of your life.
I'm in my 30s and could make 3.8 million last me the rest of my life. Even if I wasn't good at investing and just put it in an interest checking account earning 1% interest, it would earn 38,000 a year. Which is right around what I make now. There's two of them, and you do have to account for inflation, but it really wouldn't be difficult to get 2-3% return on that and still be able to live off the interest alone.
They are soooooo poor 😭 😭 😭 i can't contain my sadness over this unjust tax 😭 😭 😭 Their house is worth 🤑4,5 million dollars🤑, and they don't want to 😡subsidize the state😡, that would be 👿evil socialism👿 ‼️ ‼️ ‼️
damn, i wish i had that problem.
This is the dumbest fucking article, holy shit. Fucking boomers. Cry more about paying the already generously low LT cap gains tax. Jesus fucking christ.
The one thing that would turn my exhausted ire into joyful schadenfreude is if they equity-leveraged the shit out of it, and didn’t understand that this would hit them in the balls when they eventually sold.
I wish the boomers would just die already. At this rate I’m going to live my whole life under their greedy little thumbs
Yeah. My wife and I paid roughly 38% on the 120k we made last year through grueling hours and hard work.
These old fuckers should pay at least that much in taxes on the house they made millions on just by living in it.
Capital gains tax of up to 20%.
What's 5x 700,000 ?
"The Friedmans finally put their house on the market in May for nearly $4.5 million"
Cry me a fucking river, boomers.
Enough that they shouldn't fucking care.
Yeah, and the tax is only on the profit they make, not the entire selling price.
And any capital improvements will lower that ‘profit’ too. So anything from a new water heater to a new roof can be used to raise the cost basis of the home lowering the tax paid.
Both of those examples are “regular maintenance” that aren’t legally capital improvements
At least as importantly , who tracks this stuff for the decades you might live in a house. I always thought this exemption was good in fairness alone: as someone just trying to live, I’m unlikely to keep the decades of paperwork needed for this, whereas a wealthy person with an accountant or business manager would
Yeah but profit is just how long you’ve lived there
Where exactly is this a dystopia? The part where rich people too have to pay taxes?
I guess you're mistaken, /r/aceoandultrawealthydystopia is a different sub.
The fact that the house is woth that much in the first place. Thing is owning a single home doesn't make you rich, since you need a home to life, you can't get that money unless you're willing to downgrade. Now these people are, but the tax is limiting their options. Real estate should be taxed while you have it, not when you sell.
Sounds like they can afford it if they're rich enough to own that house.
Oh no. They only get to keep 2.8 million? Whatever will they do?
The tax is only 20%, like you get to keep the other 80%. That sounds pretty good to me.
Everyone in here is ripping these people and ignoring their actual situation and the problem it creates for all of us.
If their profit is that high, they bought decades ago, when the price of a home like this was in the reach of a normal high paid professional. Decades later after raising kids, paying for college, and saving normally, they might not be wealthy, or even rich in cash and investments. This house might be a large majority of their net worth. And guess what? Anywhere they want to move is going to have had the same crazy inflation as their current home. Why would they sell when, after taxes, any place they buy with what's left will be a major step down.
And for their specific example, 55-plus communities usually sell for much less per sqft because they come with huge HOA fees to fund all their amenities. Generally people expect to pay these fees with the difference between the sale of their old home and the new one. They might not be able to afford the HOA fees after taxes.
They've got two choices: They can sell and either make up the taxes with their savings, drastically reducing their standard of living (if they're even able to do that, don't forget if they take 700k out of a 401k all at once they'll get wrecked in taxes that year) or move somewhere shittier with the after tax proceeds. Or stay in their too large home, keeping it off the market. Edit: I forgot a commonly used option; keep the old place, rent it out and charge enough to pay the mortgage on the new place and property tax, HOAs, and maintenance on both (and why not a little profit too?), further fucking the market.
Empty nesters staying in their family homes keeps them off the market driving up the costs for young families and everyone else in the market as a whole.
As far as a solution goes, I'm not a fan of a larger exemption. I would advocate a special account for home sale profits, kind of like an HSA or a 529, that could only be used tax free for qualified expenses like purchasing a home, property taxes, and HOAs. But anything that encourages older people to leave their too-large homes for something more suitable would help the market for everyone.
If you can't get past "boo hoo rich people problems," cut the numbers in half, or more. The problem persists. In California a profit in excess of 500k (250k for a single person) after decades of living in a modest family home is not at all rare. Many normal people who are not rich by any stretch find themselves in this situation.
My MiL was in this exact situation (selling and moving to a 55-plus community), and she is not rich. To make the numbers work I had to make her investments higher risk/higher reward than they should be for her age to allow for larger withdrawals. Luckily she has my wife and I to make up the difference if it goes tits-up, but not everyone has that luxury.
So in other words it is taxed substantially less than income... Even though it is clearly a form of income... Cry me a river...
You're fucking kidding me, how does this count as a dystopia?
I know a way they could avoid those capital gains taxes...