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> For example, if you sold your house for $2m, your effective tax rate on the sale would be 5% The tax on capital gains in this case would be 20% federal, ~10%

> For example, if you sold your house for $2m, your effective tax rate on the sale would be 5% The tax on capital gains in this case would be 20% federal, ~10% state (in California), 3.8% ACA investment tax. That's an ~34% rate, not the 20% you seem to think applies. > the only cash you need to come up with is the down payment for the new house Let's take the simple case where the old house was paid off, no mortgage. Are you suggesting that it's unreasonable to want to downsize and still not have a mortgage? If you do have a significant mortgage, and are hence highly leveraged, an increase in property prices is pretty good. If your mortgage is more or less paid off, you can in fact end up in a situation where you can't buy any house at all in the same general market after selling your existing one and paying the property taxes. See a worked-out example at https://news.ycombinator.com/item?id=15706565 https://news.ycombinator.com/item?id=15706565

gamblor956 9y ago
The 3.8% net investment income tax doesn't apply to real property, it applies to investment property. The NIIT specifically excludes gains from the sale of primary residences. The IRS provides a helpful FAQ on this: https://www.irs.gov/newsroom/net-investment-income-tax-faqs https://www.irs.gov/newsroom/net-investment-income-tax-faqs. Second, the 25% rate is an approximate rate that combines the federal and state rates while taking into account the deduction for state and local taxes. 25% is a nice round number. I'm not going to prepare a detailed tax model for an anonymous internet comment. My point stands either way: he's whining about having to pay an effective tax rate of 10-15% on his profits from selling his million dollar house while people in other parts of the country are struggling to even afford rent. He's acting like an entitled child and quivering about the exact tax rate he pays doesn't change that.
- bzbarsky 9y ago
  > The 3.8% net investment income tax doesn't apply to real property Ah, I didn't realize that, thank you! > he's whining about having to pay an effective tax rate of 10-15% on his profits No, the key part of the complaint is that the combination of price rise and tax structure mean that a lateral move requires liquidity he does not have. It's a first-world problem for sure, but it's still a problem caused by the fact that we have various fairly dumb tax policies.

gamblor956 9y ago

The 3.8% net investment income tax doesn't apply to real property, it applies to investment property. The NIIT specifically excludes gains from the sale of primary residences. The IRS provides a helpful FAQ on this: https://www.irs.gov/newsroom/net-investment-income-tax-faqs https://www.irs.gov/newsroom/net-investment-income-tax-faqs. Second, the 25% rate is an approximate rate that combines the federal and state rates while taking into account the deduction for state and local taxes. 25% is a nice round number. I'm not going to prepare a detailed tax model for an anonymous internet comment. My point stands either way: he's whining about having to pay an effective tax rate of 10-15% on his profits from selling his million dollar house while people in other parts of the country are struggling to even afford rent. He's acting like an entitled child and quivering about the exact tax rate he pays doesn't change that.

bzbarsky 9y ago
> The 3.8% net investment income tax doesn't apply to real property Ah, I didn't realize that, thank you! > he's whining about having to pay an effective tax rate of 10-15% on his profits No, the key part of the complaint is that the combination of price rise and tax structure mean that a lateral move requires liquidity he does not have. It's a first-world problem for sure, but it's still a problem caused by the fact that we have various fairly dumb tax policies.