Considering a Senior Living Community?

When moving to a senior living community, many people contemplate what to do with their home. Should you rent your current home or sell it? There are several factors to consider when you are making this decision.

What you need to know about renting or selling your current home

Renting Your Home

There is a growing trend of baby boomers who are trading in their large family homes to downsize to active senior living communities where they can participate in wellness programs and maintain a social lifestyle. Initially, if it is your preference to rent out your home, there are many benefits. One advantage that many people find comforting is having the option to return home 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 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 you, the 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.

Selling Your Home

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. Shari S. Motooka-Higa, Certified Senior Advisor and Director at Locations real estate firm, shares that it is vital to consider the federal tax home sales exclusion law for capital gains. The federal tax exclusion on the sale of a principal residence is up to $250,000 per person. For married couples this would equate to $500,000 of exclusion. To qualify for the exclusion you must have resided in the home as your primary residence for at least two of five years prior to closing of the sale. In other words, the tax law stipulates if a home is no longer your primary residence for three years or more, it may be reclassified as an investment property. As a result, you may forfeit your tax exclusion and would 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.

Prior to making any decision, 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 circumstance.

Ready to learn about senior real estate needs? Locations will be launching a series of virtual real estate seminars for seniors beginning this November. See our article next month for more information.