Downsizing for Retirement: 3 Things to Consider Before Selling

1. Understand the tax consequences of selling your home

Under federal law, eligible taxpayers may exclude up to $250,000 of gain on the sale of a principal residence, or up to $500,000 for qualifying married couples filing jointly. The exclusion concerns gain, not the full sales price.

In general, the homeowner must satisfy ownership and residence requirements covering at least two of the five years before the sale. A separate look-back rule generally limits how often the exclusion may be claimed. Married couples must meet additional requirements for the full $500,000 exclusion, and exceptions or special rules can apply.

If part of the home was used for rental or business purposes, additional tax rules may affect the result. Consult a qualified tax professional before estimating proceeds after tax.

2. Confirm the property is ready to sell

Review the recorded deed and identify everyone whose signature or authority may be needed to convey clear title. Marriage, divorce, inheritance, trusts, and the death of a co-owner can affect the documents required for closing.

Addressing title questions early can reduce the risk of unexpected delays once a buyer is found.

3. Coordinate your next home with your estate plan

Your next property may be smaller, but its ownership structure still matters. Consider whether you will buy alone or with someone else, relocate out of Massachusetts, or use a trust or another estate planning arrangement.

If you are moving to another state, have your estate planning documents and planned property ownership reviewed under the applicable laws of your new state.

Plan the sale and the next chapter

Downsizing can simplify day-to-day life, but a smooth transaction requires attention to taxes, title, and long-term plans. Selami Law can assist with real estate and estate planning questions as you prepare for the transition.

This article is for general informational purposes only and does not constitute legal or tax advice. Laws and individual circumstances vary. Consult a qualified professional about your situation.