Downsizing after 50: planning a Tampa move before retirement

Downsizing in your 50s vs downsizing after 60

Our guide to downsizing after 60 in Tampa is about the move itself: deciding the timing, the first 90 days, the money checks and how to order the sale and the purchase. This page sits a step earlier. In your 50s the move is often optional, which is exactly why it rewards planning. You can choose the year you sell, and you can line the move up with the rules instead of discovering them at the closing table.

• Income is often still coming in, so the sale lands in a working year. Ask a lender and a CPA how the choice of year affects you.
• The next home may be home for a long time. A purchase at 52 has to work at 62 and 72.
• There may be more than one move ahead, and federal and Florida rules both have timing windows that matter when moves are close together.
• Long-held benefits are in play. A Hillsborough County homestead owned for years may be assessed well below market value.

If the house still fits and the costs feel manageable, staying put is a perfectly good answer. If the household has shrunk recently, our guide on downsizing after kids move out covers what to sort first and how to judge whether the house still fits.

The ages that matter when you plan in your 50s

Several rules turn on a birthday. Others, including the main federal tax break on a home sale, do not depend on age at all. Knowing which is which keeps you from waiting for a milestone that changes nothing.

Social Security's retirement ages shape many plans too. We could not open the Social Security Administration's pages while writing, so we have left them out; the agency answers questions about your own benefit.

Selling while you still work: the federal home sale exclusion

The Florida Department of Revenue says Florida does not impose a personal income tax, so the gain on your house is a federal question. IRS Topic 701 sets out the main rule:

• The exclusion. If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 if you file a joint return with your spouse.
• Ownership test. You or your spouse owned the home for at least 24 months (2 years) out of the last 5 years before the date of sale.
• Use test. You used the home as a residence for at least 24 months of the previous 5 years. On a joint return, either spouse can meet the ownership test, but both must meet the use test.
• Different periods are allowed. The two tests can be met in different 2-year periods, as long as both fall within the 5 years ending on the date of sale.
• The two-year rule. Generally you are not eligible if you excluded gain from the sale of another home during the two years before this sale.

Why the two-year rule matters more in your 50s

Owners who downsize early are the ones most likely to move again. Here is a hypothetical. A couple sells a long-held house, uses the exclusion and buys a condo. Eighteen months later they decide to move closer to family and sell the condo at a gain. Because they excluded gain on another home within the past two years, they generally cannot use the full exclusion on the condo. IRS Publication 523 explains that a partial exclusion may still be available when the main reason for the sale was a change in workplace location, a health issue or an unforeseeable event, so a CPA should look at the facts before the second sale.

The same publication says to keep records documenting your basis until 3 years after the due date of your return for the year you sold, so start a folder now with closing statements and improvement receipts. Topic 701 also says you must report the sale if you receive Form 1099-S, even when the gain is excludable. Our guide to capital gains on a home sale in Florida walks through the gain calculation itself.

Sources: IRS Topic 701, Sale of your home; IRS Publication 523, Selling Your Home.

Florida homestead and portability when you move before retirement

The Florida Department of Revenue explains the Save Our Homes cap: after the first year a home receives a homestead exemption, its assessment each year cannot rise more than 3 percent or the percent change in the Consumer Price Index, whichever is less. The gap between assessed value and just (market) value is your Save Our Homes benefit. A house bought in your 30s or 40s may carry a sizable one by the time you are in your 50s.

That benefit does not stay with the old house. The Department says a sale is a change of ownership, and the property is then assessed at just value on the following January 1. The home you buy is reassessed the same way, so the seller's tax bill tells you little about yours. Our guide to how a Tampa property tax bill is built explains the reset line by line.

Portability, and why the window matters

• Three years, counted from January 1. You must establish a homestead exemption on the new home within three years of January 1 of the year you abandoned the old homestead, not three years after the sale.
• Forms. File Form DR-501T, Transfer of Homestead Assessment Difference, with the homestead exemption application, Form DR-501, by March 1.
• The cap. Section 193.155, Florida Statutes, limits the transferred difference to $500,000.
• Buying a less valuable home. When the new home's just value is lower than the old one's, the statute sets the new assessed value at the new just value divided by the old just value, multiplied by the old assessed value.

The window is the planning point for anyone in their 50s thinking about a stopgap. If you sell, rent for a while and buy later, the three-year clock is running the whole time. Our Florida homestead portability guide covers couples and timing around January 1, and the portability calculator runs the statute's formula with your own values.

January 1 and March 1

The Hillsborough County Property Appraiser says you need legal or beneficial title by January 1 of the year you apply and must live on the property as of January 1, with Hillsborough County as your legal domicile. The statutory filing deadline is March 1, extended to the next business day when it falls on a weekend or legal holiday. A closing in late December or early January can change which year the new exemption starts.

Sources: Florida Department of Revenue, PT-112; Section 193.155, Florida Statutes; Hillsborough County Property Appraiser, homestead and other exemptions.

Planning ahead for the senior exemption at 65

Florida lets counties and cities adopt extra homestead exemptions for owners 65 and older with limited household income. Section 196.075 of the Florida Statutes sets the framework. The Hillsborough County Property Appraiser lists how it applies locally.

• Who qualifies. At least one owner is 65 or older on January 1, the home receives the homestead exemption and household income is within the yearly limit. The office says the exemption is based on income received in the prior year and the limit is adjusted each year.
• How much. The City of Tampa and unincorporated Hillsborough County allow up to $50,000, and Temple Terrace up to $25,000, against the taxes each one levies.
• Long-term residency. The City of Tampa and unincorporated Hillsborough County also offer a long-term residency version for owners who meet the low-income senior requirements, on property with a just value of less than $250,000, who have kept their permanent residence there for 25 consecutive years. The statute ties those 25 years to the property itself.

For most owners in their 50s this is background. But if your income could fall within the limit later and you have lived in your home a long time, moving restarts the residency count on that version of the exemption. Our guide to Florida property tax exemptions for seniors covers the other exemptions in more detail.

Sources: Section 196.075, Florida Statutes; Hillsborough County Property Appraiser, Senior Citizen exemption.

Medicare at 65 and the timing of a move

A move in your 50s may land years before Medicare, or right beside it. Medicare.gov sets out the dates:

• Initial Enrollment Period. Generally 7 months, starting 3 months before the month you turn 65 and ending 3 months after it.
• Part A. If you qualify for premium-free Part A, coverage starts the month you turn 65, or the month before if your birthday is on the first.
• Missing the window. You may have to wait for the General Enrollment Period, January 1 to March 31, and pay a monthly late enrollment penalty for as long as you have Part B.
• Still working at 65. If you or your spouse have group health coverage through current employment, a Special Enrollment Period runs until 8 months after that coverage or the job ends, whichever comes first. Medicare.gov says COBRA is not group health plan coverage, and the end of COBRA or retiree coverage does not open this window.

The practical point is calendar space: a closing, a move and a sign-up deadline in the same month is avoidable when you plan a few years out.

Source: Medicare.gov, When does Medicare coverage start?

Choosing a smaller home that still works in 20 years

Buying in your 50s means buying for a long stretch. Describe the home you need, not who it is for, and test each listing against the list below.

• Bedroom, full bath, kitchen and laundry on the main level, so stairs are optional rather than daily.
• A step-free entry, or one that could be made step-free without major work.
• Doorways and a bathroom layout with room to change later, such as space for a walk-in shower.
• Clear answers on who maintains the roof, exterior and grounds, in writing, if there is an association.
• An insurance quote and a look at the flood zone before you make an offer.
• A drive you can live with to work now and to the places you expect to go later.

Our guide to single-story homes in Tampa shows what to check on ranch houses, villas and condos. If you are looking at age-restricted communities, the 55+ communities in the Tampa area page covers how they work. Under 24 CFR 100.305, at least 80 percent of a qualifying community's occupied units must be occupied by at least one person 55 or older. Each community sets its own policy within that rule, so ask for it in writing.

A downsizing timeline for your 50s and early 60s

Every plan runs on its own clock. This order keeps cheap, reversible steps ahead of costly ones.

When the time comes to set a date, our plan for downsizing after 60 picks up from here with sequencing the sale and purchase.

Talking it through with a local agent

If you would like to hear how a sale might fit your timeline, you can ask for an introduction to an agent on the operating team at eXp Realty.