Selling Your Home to Move Into Senior Housing

According to the U.S. Department of Health and Human Services, about 70% of people over age 65 will require at least some long-term care services. According to the Census Bureau, that population is projected to grow to 73.1 million by 2030.

For those moving to a senior living facility that provides some level of care—from weekly housekeeping to daily assistance—selling their home to fund senior living and care may be their best choice.

Here’s everything you need to know to decide whether to sell your house to move into senior living.

Should You Sell Your House to Move Into Senior Housing?

Generally speaking, selling their house is in most people’s best interest if they’re moving into assisted living. Your home is a valuable asset and can help fund your senior housing, and if you need to move into senior living, you don’t want to have to pay for that on top of a mortgage, property taxes, and other costs associated with owning a home.

A study by the real estate brokerage Redfin and the senior living referral service called A Place for Mom looked at how many years of senior housing a home sale is worth in 162 cities.

Not surprisingly, homes in expensive real estate markets bought the most senior care, with eight of the top 10 areas in California. San Francisco led the list, with a home sale there paying for either 22 years of independent living, 16 years of assisted living or 13 years of memory care for seniors with cognitive impairment.

The study had another interesting point: Selling a home pays for more years of senior living in affluent cities. The reason is senior living costs don’t vary as much geographically as home prices. Homes may be much more expensive in California, but senior living facilities aren’t.

Seniors with mortgages have usually lived in their homes for a long time and have built a lot of equity. Many have even paid off their 15- or 30-year mortgage entirely, which translates to a lot of extra funds when it’s time to sell—especially in bigger housing markets.

But when should you sell your home? You might want to sell before or after moving into senior housing for several reasons.

Selling Before Moving to Senior Living

There are a few reasons why it’s a good idea to sell before you move into senior housing:

• You get money to finance your senior living sooner. If you need the funds in order to move into senior housing, using your home as an asset is a powerful way to fund your transition to senior housing immediately.
• You can budget more effectively. Since you’ll know how much money you’ll have for senior living if you sell before moving out, you can better manage your finances for long-term housing and ensure you can continuously pay for your housing.
• You don’t want to pay for two living situations at once. If you plan on permanently transitioning to senior housing, you might cut too deep into your funds by paying for a mortgage and assisted care simultaneously.

Selling After Moving to Senior Living

Before moving into senior care, you don’t always need to sell your home. There are a few situations when you might want to wait to sell your home:

• You need to go into senior housing immediately. If you cannot live alone, you might not be able to sell your home while still living there. It’s not uncommon for patients who have medical conditions to move straight into senior housing because it’s unsafe to live alone.
• You can better stage your home. When you’ve moved out and your home is empty, it’s easier to stage your house and make it appealing to potential buyers. You also won’t need to worry about people coming in and out of your living space to check out your home.
• You want to remodel before selling. Like staging a home, it’s easier to remodel when no one lives in the house.

Don’t Forget About Capital Gains Taxes

When you sell a property for more than you paid, you may incur capital gains taxes on the profit. But that’s unlikely for most people because of the tax laws, says Andy Smith, senior vice president of financial planning at Financial Engines.

For a married couple filing their taxes jointly who are selling their home, a profit of up to $500,000 is tax-free if they lived in the house for any two of the last five years, he says. For an individual, the cap is $250,000.

99% of people are in such situations, Smith says. “That kind of takes taxes off the table for a lot of people,” he says.

Anyone who does have profits on a home sale higher than the listed amounts would pay long-term capital gains, Smith says, though it wouldn’t be too high for most people.

There isn’t a long-term capital gains tax for someone in a 10%-15% tax bracket. But someone in a 25-38% tax bracket would pay a 15% tax on such capital gains, Smith says. For a 39.6% tax bracket, the tax rate would increase to 20%.

If you’ve only had the home for less than a year, you would pay short-term capital gains taxes, taxed as ordinary income at a rate between 10% to 37% depending on your tax bracket. However, this usually isn’t the case for seniors.

Remember your taxes when selling your home, as you may need to account for that in your financial planning.

How Selling Your Home Affects Senior Benefits

There are a few downsides that come with selling your home as a senior. For one, it might get in the way of your Medicaid eligibility. Most states have an asset limit of $2,000, so selling your home would make you exceed this limit and void your eligibility.

If you get Veteran Pension benefits, you also have a net worth limit to consider. The current 2024 VA Pension net worth limit is $155,356, which means if you sell your home, you’ll likely go over the net worth limit for you and your spouse and have your benefits reduced.

You may think it would be worth keeping your home to retain your benefits, but if you need regular care, the cost of a live-in aide is usually at least $45,000 annually. Consult with a financial professional or an accredited VA benefits advisor to determine your best course of action.