Time to downsize? You may be wondering what you should be thinking about and what boxes to check. There are a number of reasons that motivate people to downsize – and each person’s reasons and triggers are different.

Financial Needs May Mean Time to Downsize

If you’ve owned your home for years, its property value has likely increased. Downsizing can help you use your equity for more important things like medical care, vacations or investments.  Rather than working for your home by cutting grass and cleaning gutters, you can sell your home, move to something more manageable – and put the equity in your home to work for you.

While I am not an accountant or tax advisor, I still feel safe reminding you that the current tax laws give you a big protection from capital gains taxes on that cashed out equity. If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. IRS Publication 523, Selling Your Home provides rules and worksheets.

In general, to qualify for the Section 121 federal tax exclusion, you must meet both the ownership test and the use test. You’re eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you’re not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. Refer to Publication 523 for the complete eligibility requirements, limitations on the exclusion amount, and exceptions to the two-year rule.

To read all about this topic as explained by the IRS, just click here for a link to their page.

Physical Needs

Mobility limitations can make it more difficult to navigate stairs to a basement laundry room or upstairs bedroom. Moving into a single-level home or a condo or co-op with an elevator can be a more practical solution.  There also are a number of interesting options for senior communities around the area which might provide even more answers to mobility limitations.

Medical Care May Be Better Elsewhere

Many seniors receive medical care and personal assistance at home. However, sometimes it’s more convenient to receive these services in a specially designed facility that offers 24-hour care.  If you think that it is time to downsize and medical issues are in your future, you might want to make sure that the community that you move to has good medical care facilities, memory care and assisted living.

Maintenance Issues May Mean Time to Downsize

From changing light bulbs to mowing the lawn and repairing plumbing issues, homeownership is hard work. Many senior communities can handle these tasks for you.  Even if you don’t consider a senior community, a small house will have fewer maintenance issues.  A condo will come with someone else to cut your grass and wash your windows!   My aunt sold her house in a weekend and moved to Florida just because she had to replace the garbage disposer in her old house.

Family Means Time to Downsize

Family is probably the number one reason why people move. You may be downsizing to move in with family or at least closer to family.  You may need extra room for relatives who are joining you. Downsizing could also allow you to move into a more desirable area or a warmer climate.  Even if you don’t want to live with family members, you might consider having a famiy member build an ADU or tiny home in their backyard so that you have the privacy of your own home but right next to your loved ones.

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