Moving to A Senior Living Community? What to DO with Your Home.
When moving to a senior living community, many people contemplate what to do with their home. Should you rent or sell? There are several factors to consider when you are making this decision.
RENT: Shari S. Motooka- Higa, is an instructor for the National Association of REALTORS® Seniors Real Estate Specialist Designation credit courses. According to Motooka-Higa, there is a growing trend of baby boomers trading in their large single family homes to downsize to active senior living communities where they can participate in activities and classes. Initially, if it is your preference to rent out your home, there are many benefits. One advantage that many people find comforting is having your home to come back to in the event you dislike living in a community setting. Additionally, retaining your home allows you to continue building equity. You may also benefit from using the monthly funds generated from your rental to subsidize the costs of your senior living community.
On the flip side, tenants may not maintain the home as well as a homeowner. Home operating expenses should be factored into your budget in the event an appliance breaks or property repairs are needed. Maintenance and repairs are the responsibility of the homeowner.
SELL: After moving to a senior living community, many seniors find that they truly enjoy their new lifestyle and decide they have no intention of returning to their home. At this point, they are ready to sell their home. Kay M. Mukaigawa, President and Principal Broker of Engel & Völkers- Honolulu shares that it is vital to consider the Federal tax home sale exclusion laws for capital gains. The federal tax exclusion on the sale of a principal residence for a single person is up to $250,000 and for married couples is up to $500,000. Basically, to qualify for the federal tax exclusion you must have resided in the home as your primary residence for at least two out of five years prior to the closing of the sale. In other words, the tax laws stipulate if a home is no longer your primary residence for 3 years or more, it may be reclassified as an investment property. As a result, you forfeit your tax exclusion and will be required to pay capital gains tax on the proceeds of the sale of your home. In many cases, the amount of taxes owed can be significant.
Join Kay Mukaigawa and Shari Motooka-Higa for an informative free seminar that will provide updates and senior living options. Prior to making any decisions, it is strongly recommended that readers consult appropriate experts and licensed professionals for any legal, tax, and accounting advice to determine how this information may apply to their particular circumstances.