Is the tax situation better if you sell your home and "downsize" after age 55 and why?

Answer 1

The tax benefit of owning a large (more expensive) home is that you can deduct your property taxes from your income tax. Since most people are still working after 55 - and making more than were at 45, there really is no benefit to getting a smaller house from a tax standpoint - provided you itemize your deductions.

But you're only deducting what you're paying in tax. So you can save taxes by buying a smaller house on which you'll pay lower taxes. That's true for any age.

Answer 2

Its hard to answer without having additional details. Some things to consider:

1. property taxes are likely to be higher on a larger home as pointed out in a previous answer.

2. Is your current home paid for? If you are planning on retiring at 55, you'll want to consider what you expect your monthly income to be. If you owe money on the home, a good portion of your "retirement" income could go towards paying the house. Also, you monthly expenses. Its less expensive to pay the heat, water, etc bills on a smaller home.

3. If you were to sell your home, you could have 250k, 500k if married, tax free. Only the excess of these amounts would be taxable to you. (assuming you haven't sold a house in the last 2 years)

4. Do you have a family you would like to give the home to once you are no longer on yahoo?

Answer 3

I know of no tax change upon reaching age 55.

A thing to consider is your ongoing property tax. Although you downside, your property tax basis could increase, depending upon where you live.

Answer 4

downsize to a motorhome and the kids cant come home lol