Sell or Stay in Place

When you approach the idea of selling your residence, your serious concerns pivot on:

  • “How much money do I receive at escrow closing, NET of expenses?”
  • “How can I avoid legal liability – what can my Realtor do to help me?”
  • “I know I will owe taxes on capital gains, but what options do I have to reduce them?”
  • “Where is my next home located and what do I WANT and NEED?”…

We directly address these, and many more, concerns
with the understanding you just want to make informed decisions.


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Page Jumps
1. Prop-19 Eligibility
2. Assessing Tax on Capital Gains

What are your estate tax strategies?

3. The Fine Print – Technical Details


Aging Homeowners
Face Different Challenges

3 Top Reasons:
HEALTH, FREEDOM, PEACE OF MIND

Odds are your home has appreciated A LOT in value over the past several years. But the market may be leveling out with prices shifting downward in some geographic areas. You may be thinking “what next and should I sell”? Should you move unrealized profits into other assets, conduct estate planning, take other action? If you buy another personal residence, can you ‘move’ your lower tax base to your new home and how can you mitigate Tax on Capital Gains from years of appreciation?

By 2024, one in four people in the United States will be 60 or older. People are living longer. At some point, many 55+ homeowners will sell their homes, whether it be a choice to downsize or because circumstances force them to make a move.

The logistics of preparing a family home for a sale and downsizing a lifetime’s worth of possessions can be daunting. More, the financial and tax implications of selling a home can affect that long-awaited (and much deserved) retirement or change estate planning.

Some things to keep in mind when considering a later-in-life home sale:

  • It’s a family affair – Although most seniors make the decision to move, their adult children or other family members sometimes help them decide whether moving is the best alternative. Involve the family in the decision!
  • Legal concerns – An adult child or another family member might need authority to make legally binding decisions regarding the sale if a parent is ill or incapacitated. A durable power of attorney naming the person who will act on behalf of the sell must be done prior to the incapacity.
  • Financial consequencesSelling a home can trigger significant taxation, especially if proceeds aren’t used to purchase a replacement home and tax on capital gains apply. Since every case is different, it’s best to contact a tax expert or financial advisor to determine how the sale will affect the seller financially.

Odds are your home has appreciated A LOT in value over the past several years. But the market may be leveling out with prices shifting downward in some geographic areas. You may be thinking “what next and should I sell”? Should you move unrealized profits into other assets, conduct estate planning, take other action? If you buy another personal residence, can you ‘move’ your lower tax base to your new home and how can you mitigate Tax on Capital Gains from years of appreciation?

We will assess your capital gains tax exposure & Prop 19 eligibility for (real property tax portability) – from your existing to new residence by gathering key information that serves to define, with particularity, what you can / cannot do to mitigate tax liability exposures. We will confidentially assess such facts as age, ownership vesting, purchase date, price paid, capital improvements that increase “cost basis”, confirmation that it is your primary residence for the requisite timeframes, and more.

There’s a lot to the process here.
We will
help, simplify, & advance your best interests.

CA Proposition 19 – Are you eligible?

Homeowners who are ≥ 55, severely disabled, or whose homes were destroyed by wildfire or natural disaster, may transfer the taxable value of their primary residence to a replacement primary residence:

  • Anywhere in the state – regardless of the location
  • Regardless of the value of the replacement primary residence — even if it’s greater in value (with an upward adjustment in the tax basis if the replacement property is greater in value)
  • Within two years of the sale of the original primary residence
  • Up to three times

Eligible homeowners would consider selling to be closer to family and/or medical care, to downsize, or move to a home that better meets their needs without a property tax increase (with an adjustment upward to their tax basis if the replacement property is of greater value).

Consider these Frequently Asked Questions and these examples:

We help you determine, and qualify for, eligibility which pivots off several factors: when you bought your property, how old you are, how much you paid for your primary residence, confirmation that it is your primary residence and that you reside in it, whether you made capital improvements that add to your “cost basis”, and more. We can even assist with you prepare the filings with the County Tax Assessor’s Office to ensure your real property taxes are properly assessed.

* Note: Senate Bill 539 clarifies Prop-19 HERE Senate-Bill-539 and Property Tax Exemptions From Reassessment and Prop 19 Implementing Legislation (car.org)

* Note: Matters involving multiple properties and/or generational transfers require added scrutiny and proper documentation to be prepared / filed with governmental agencies is vital.

Tax on Capital Gains?

Appreciation –value increase– is great news but it comes with tax on capital gains which is a particularly huge concern for an aging America.  Some of that value increase is likely taxable as a Long-Term Capital Gain if not otherwise exempt under the Internal Revenue Code.

Ultimately, you have 3 basic options to contend with potential tax on capital gains if you choose to sell your home.

  • Pass title at death with a stepped-up basis (capital improvements), or
  • Pay tax on Capital Gains in the year of sale, or
  • Defer or eliminate the taxas much as $37,000 on every $100,000 of Capital Gains

If you are considering which option best fits YOUR situation, contact me.
No cost. No commitment. Just a dialogue.

I will generate a report that shares potential tax on capital gains and ways to mitigate exposures.

We will evaluate your home value against neighborhood comparable closings and active listings, the economy, trends, tax estate planning, address your desired cash flow needs and retirement aspirations. Together, we will discuss implementation of strategies and timing while providing legal and tax advice along the way.

In the end, our aim is to help you make YOUR right decision.


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As you can imagine, there’s a lot that goes into the tax analysis that requires refinement and discussion. We will work with you to get the numbers as close to right as possible so you can best assess your options. I am happy to discuss my findings with your CPA, estate planner, or other professional to settle on your best go-forward strategy!!

Disclaimer


The fine print. Details matter.

Most home sellers don’t have to report the transaction to the IRS because the profit does not exceed $250,000 for single taxpayers or $500,000 for married taxpayers (§ 121 Exemption). However, if you’re one of the exceptions, knowing the rules will help you hold down your tax bill. TurboTax addresses some of the most common topics, concerns, pivot points, & solutions:

» TurboTax – Tax Aspects of Home Ownership: Selling a Home
» TurboTax – Home Ownership Tax Tips

But what if your NET sales proceeds exceed your §121 Exemption – Deciding whether or when to sell includes these basic options:

  1. DON’T SELL. You might choose to retain ownership regardless of whether you have outgrown your home’s size & needs and you have sufficient funds to pay maintenance and other costs. Beneficiaries will receive stepped up basis (FMV of property) on date of death.
  2. SELL. You might choose to sell your home for any number of reasons in which case you may be required to pay the full tax on Capital Gains in the year of sale. To mitigate your exposure, you would try to increase / adjust the cost basis with added, provable capital improvements; or
  3. DEFER or ELIMINATE. With carefully customized legal & tax documentation, there are ways to facilitate tax deferral (not avoidance) or eliminate the tax on Capital Gains portion of NET sales proceeds.

As an example of deferral, IRC § 453 can be used to sell your home on an installment basis that defers capital gains taxes either on an incremental basis or to a future balloon payment. The positive impacts of spreading tax on some of the NET sales proceeds into future years cannot be overstated. Invoking this solution can materially affect your cash flow, and what health & government programs you might qualify for.

As an example of elimination, a charitable trust charitable trust is an irrevocable trust that may be set up during life or at death if you wish to leave all or some portion of your estate to charity. These trusts are used for philanthropic reasons as well as to obtain certain tax advantages. There are two specific types of charitable trusts: a charitable remainder trust and a charitable lead trust, often known as a “split interest” trust. may be an ideal tax-savings option for those that wish to make a substantial gift to charity. It can also operate as a remainder trust—set up to provide an income stream to a trust beneficiary (often you or your spouse) during the term of the trust, which is typically a fixed period, or the life of the named beneficiary. At the end of the trust term, the trust terminates, and the remainder of the trust value passes to specific chosen charities.

Is there a viable option?

Given these options, the smart move is to capitalize on the current market, maximize NET sales proceeds, and invest / grow the amount of money you would otherwise pay in taxes by deferring or eliminating the CAP GAINS tax. Ours are viable strategies that are customized to your specific needs and cash flow requirements. It absolutely makes good sense to discuss these matters.

To advance your thoughts, at no charge, we will confidentially gather key data in order to discuss your goals, timing, and property value that may lead to a consultation with our tax estate planning attorney (LL.M.) partners who will present you with several well-explained alternatives. They will then draft tax estate planning that serve your needs.

With the accepted tax estate plan, our TEAM lists your residence or I co-list it with your personal Realtor.

I stay personally involved as your real estate professional (listing Broker / Attorney) throughout all activities from start to finish and directly participate and facilitate maximizing NET sales proceeds while mitigating legal / tax liabilities. I coordinate the TEAM effort, maintaining open communications throughout.

My compensation comes from real estate commission and is contingent upon escrow closing.

Please call or email me to schedule an in-person meeting or conference call.

We’ll discuss property value, timing, the economy, trends, tax estate planning, cash flow, retirement aspirations, and implementation of strategies. Ours is a common sense, balanced, & communicative approach. With combined 100+ years expertise in real estate brokerage, law, estate planning, and tax, we will help you make informed and positive decisions to maximize your position!

For more information – call 888-529-6632 or Email

Everyone’s situation is different so call or email for a complimentary review. Our aim is to provide you with baseline information and advice so you can make informed decisions.

To learn whether you have a gain or loss on the sale of your home, refer to:

For general information on the sale of your home, refer to:


Federal Tax rates on Capital Gains

The long-term Federal capital gains tax rate is either 0%, 15%, or 20%.

2021 Long-Term Capital Gains Tax Rates

Tax filing status 0% rate 15% rate 20% rate
Single Taxable income of up to $40,400 $40,400 to $445,850 Over $445,850
Married filing jointly Taxable income of up to $80,800 $80,800 to $501,600 Over $501,600
Married filing separately Taxable income of up to $40,400 $40,400 to $250,800 Over $250,800
Head of household Taxable income of up to $54,100 $54,100 to $473,750 Over $473,750

2022 Long-Term Capital Gains Tax Rates

Tax filing status 0% rate 15% rate 20% rate
Single Taxable income of up to $41,675 $41,675 to $459,750 Over $459,750
Married filing jointly Taxable income of up to $83,350 $83,350 to $517,200 Over $517,200
Married filing separately Taxable income of up to $41,675 $41,675 to $258,600 Over $258,600
Head of household Taxable income of up to $55,800 $55,800 to $488,500 Over $488,500

Short-term capital gains are taxed as ordinary income according to federal income tax brackets – 2021 + 2022.

Find out if the 3.8% Net Investment Income Tax applies to you

If an individual has income from investments, the individual may be subject to net investment income tax. Effective Jan. 1, 2013, individual taxpayers are liable for a 3.8 percent Net Investment Income Tax on the lesser of their net investment income, or the amount by which their modified adjusted gross income exceeds the statutory threshold amount based on their filing status.

The statutory threshold amounts are:

  • Married filing jointly — $250,000,
  • Married filing separately — $125,000,
  • Single or head of household — $200,000, or
  • Qualifying widow(er) with a child — $250,000.

In general, net investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, and non-qualified annuities.

Net investment income generally does not include wages, unemployment compensation, Social Security Benefits, alimony, and most self-employment income.

Additionally, net investment income does not include any gain on the sale of a personal residence that is excluded from gross income for regular income tax purposes. To the extent the gain is excluded from gross income for regular income tax purposes, it is not subject to the Net Investment Income Tax.

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State Tax rates on Capital Gains

Because California does not give any tax breaks for capital gains, you could find yourself taxed at the highest marginal rate of 12.3% plus the 1% Mental Health Services tax (where income exceeds $1 MIL). This is maximum total of 13.3% in California state tax on your capital gains. It all depends on your tax bracket. Note that the calculator below is set at 12.3% and does not factor in the 1% Mental Health Services tax for those taxpayers annually earning more than $1,000,000.

Single or Married Filing Separately
1.00 %: $0-$8,544
2.00 %: $8,545-$20,255
4.00 %: $20,256-$31,969
6.00 %: $31,970-$44,377
8.00 %: $44,378-$56,085
9.30 %: $56,086-$286,492
10.3 %: $286,493-$343,788
11.3 %: $343,789-$572,980
12.3 %: $572,981-$999,999
12.3 % + 1% Mental Health Services surtax where income is $1,000,000+


I am a 30+ year real estate professional (Attorney & Broker).
I stay personally involved in your file from start to finish collaborating with the best estate planning and tax attorneys and local Realtors to advance your best interests. Ours is a common sense, balanced, & communicative TEAM EFFORT. With combined 100+ years specialization in real estate brokerage, law, estate planning, and tax, we will help you make informed and positive decisions to maximize your position!

Let’s confidentially discuss your options!