Approximately 52 million or 16% of Americans are age 65 and over. It is easy to understand that some of them are thinking of downsizing their home because they don’t need the same space they did in the past.
It can be liberating to divest yourself of “things” that have been accumulated over the years but are no longer needed. Moving to a less expensive home, could provide savings for unanticipated expenditures or cash that could be invested for additional income.
Savings can be realized in the lower premiums for insurance and lower property taxes, as well as, the lower utility costs associated with a smaller home.
Typically, owners downsize to a home to 2/3 to 50% of their current home’s size. In some situations, it is not only economically beneficial, but their interests may have changed so that a different style of home, area or city might fit their lifestyle better.
The sale of a home with a lot of profit will not necessarily trigger a tax liability. Homeowners are eligible for an exclusion of $250,000 of gain for single taxpayers and up to $500,000 for married taxpayers who have owned and used their home two out of the last five years and haven’t taken the exclusion in the previous 24 months.