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.
I mean, I kinda get it. If a boomer just dies, and their kids inherit the house, the kids pay 0 in taxes if they sell it. Not saying that it’s right, but say they want to move their 1.5 million dollar house and downsize to a million dollar house. Then they have to pay a couple hundred grand in capital gains tax which is a wash. They get a smaller house, and their kids get a smaller inheritance. If they gave the larger house to their kids, the kids could sell it at market price and pocket the entire amount tax free.