5 Costs When Downsizing Your Home
5 Costs When Downsizing Your Home
Downsizing is inevitable when you prefer a small space and want to lower your costs. It's a good thing. You will pay less for electricity, spend less time cleaning and maintaining the home, and have the benefit of gaining a large sum of money from your home sale. To help you, here are a few costs that you will need to pay when you do sell your home.
Here are 5 costs to downsizing:
Home improvement. While costs can vary greatly, not all repairs need to be made in order to sell. Ones to focus on should include those that pertain to the home’s mechanical or structural integrity, basic landscaping, painting over scuffs or scrapes on walls, new cabinets or countertops, regrouting tile or adding a new vanity in the bathroom, and redoing the floors in some way. These can all be done affordably, but again, if you are trying to do these tasks at the last minute or in a rush, they can very well cost you much more than your budget if you’re not careful.
Taxes. Even if you’ve lived in your home for many years, when you sell the property, a large part of your equity may end up going straight to State and Federal capital-gains taxes. If you are single and received under $250K profit for the sale of your home, and you have lived in the home for at least 2 in the last 5 years, your profits are tax-free. If married, this tax-break doubles for up to $500K. Also, if two unmarried people own a home jointly and sell it, they can each receive a tax break of up to $250K. The taxes you will owe after those respective gain amounts are determined by your tax bracket: 10-15% your gain tax rate is 0; 25-35% your gain tax rate is 15%; 39.6% your gain tax rate is 20%.
Storage space. It might sound like a necessity when downsizing, but it can actually cost you way more than you really need. Think about it. If you are downsizing, the best thing you can do ahead of time is to pare down what you need and limit yourself to keeping only what will fit in your new home. Chances are, by downsizing now you won’t need everything else later. By paying for storage space each month, you are only wasting money that could be added to your savings account, instead.
Moving costs. What you pay for packing supplies and for moving services for assisting with the packing and transportation of your belongings to your new home can cost upwards of $500 and more, depending on the extent of what you have the movers do and how far you are moving. Ultimately, the longer it takes, the more money you will owe, so if you want to save money to move, it’s best to do most of the packing yourself and to give the movers reign over the larger furniture pieces and appliances.
New living expenses. Wherever you might move to, there are costs associated with everyday expenses in your area. You can be looking at a difference in grocery bills, gas for your car, parking fees, or association dues. That’s why before you ever even move or buy a new property (or sell your existing property), it’s good to research all potential new expenses you might incur, and whether or not it is going to work with your budget – with or without the sale of your existing home.
Downsizing, like all moves, needs to be planned. If you're selecting a real estate agent to sell your home and perhaps help you buy a new one to fit your present lifestyle, call award-winning Listing Agent and Managing Broker of Ryan Hill Group, Teresa Ryan, at 630-276-7575 for a no-obligation consultation.
Get a copy of our Home Selling Guide written by Teresa Ryan specifically for homeowners in Naperville and the surrounding suburbs.
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