The financial implications
Selling your home could put a pile of cash in your pocket if you have equity. But you could also end up with a tax bill on your hands.
There's a capital gains tax exclusion of $250,000 for single tax-filers and $500,000 for joint filers for people who sell their homes. You should qualify if the house was your primary residence and if you owned it for at least two years before selling it.
You also need to have lived in the home for at least two years in the five-year period before selling it, and you can't have claimed another capital gains exclusion for the sale of a house in the two-year period before your sale.
But if you're selling your home for a profit exceeding the capital gains tax exclusion you're eligible for, you could have a tax bill.
For example, if you're single and bought your home for $200,000, but it's now being sold for $600,000, you have a $400,000 gain. However, only $250,000 is eligible for the exclusion, meaning you have to pay taxes on the remaining $150,000.
On the other hand, a near-term tax hit may be worth it if you can invest your sale proceeds and grow them into a more considerable sum.
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Learn MoreThe long-term impact
There's nothing wrong with deciding that owning a home isn't right for you. But it's important to understand the long-term effects.
Homeowners who itemize their taxes may be able to deduct mortgage interest as well as property taxes as part of the SALT (state and local tax) deduction. If you never buy another home, you’ll lose that tax break.
As a renter instead of an owner, you also lose some of the stability of homeownership. For example, you may suddenly see your rent increase or be forced to move, and there's little you can do about it.
If you have children, this can be even more unnerving if you want to stay in the same school district throughout your kids' education, which could cause some upheaval.
Also, homes tend to gain value over time, and owning a home can be a means of forcing long-term savings. If you reach retirement age without much savings but have a home with a few hundred thousand dollars of equity, downsizing and collecting the proceeds could subsidize your IRA or 401(k) balance.
On the plus side, being a renter means enjoying fixed monthly costs for the life of each lease you sign. And you don't have to deal with the hidden costs of ownership, such as surprise home repairs and insurance premiums. Despite less security, it can work out to be less expensive this way.
Of course, it's recommended that you discuss the long-term implications of not owning a home with a financial adviser. They can explain the pros and cons and help you make the most of your sale proceeds should you decide to sell your house and set aside homeownership.
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