Older homeowners are increasingly reluctant to sell their properties, with over half stating they will never do so. Reasons for selling include accessing home equity for health care, avoiding maintenance burdens, and a desire for a quieter lifestyle. A key motivation is to financially assist adult children. Baby boomers with substantial real estate wealth seek effective methods for passing on assets to the next generations, while being mindful of tax implications that can affect heirs' benefits. Guidance on selling versus gifting homes is essential for optimal financial planning.
Timing and method of transferring a home directly affect potential tax obligations for heirs, with inheritance after death often resulting in a more favorable tax outcome due to the "step-up" in basis.
Selling a home can trigger long-term federal and state capital gains taxes, with careful planning needed to maximize tax efficiency, including deductions for home improvement costs.
Gifting proceeds from a home sale to children can generally be done tax-free up to certain limits, with options to exceed these limits by filing appropriate IRS forms.
Alternative strategies to selling a home include transferring ownership, turning the property into a rental, or using a 1031 tax exchange, each with unique tax considerations and benefits.
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