By Eric Berman, REALTOR®, SRES® | The Eric Berman Team at Compass
TL;DR:
Most people know the answer to this question before they ask it. What they're actually weighing is whether the timing is right and what it will cost. Two financial items matter more than anything else on Long Island and rarely come up early enough. A home owned for thirty or forty years has appreciated well past the primary-residence exclusion, and the improvement records from those decades are worth real money against the tax bill. And a home transferred to children during a parent's lifetime carries the parent's original cost basis, while a home inherited after death has its basis reset — a difference that can run into six figures. Both belong in the conversation before anything is listed.
The Signals Are Usually Practical
People rarely arrive at this question abstractly. Something specific has happened, and it tends to fall into one of four categories.
The house requires more than it returns. Maintenance that used to be a Saturday is now a project. Rooms that go unused. A yard that has become an obligation. This is the most common signal and the least dramatic — it accumulates rather than arriving.
The carrying cost has outpaced the fit. Long Island property taxes are among the highest in the country, and a fixed income doesn't adjust with them. A household paying to heat, insure, maintain, and tax square footage it no longer uses is spending money on space rather than on retirement.
Something about the layout has become a problem. Stairs, a bathroom on the wrong floor, a basement laundry. Frequently this arrives after a health event, and by then the decision is being made under pressure — which is the argument for having the conversation earlier, when it's still hypothetical.
Life has moved. Family elsewhere, a spouse's death, a desire to be closer to grandchildren or to a different kind of community.
None of these is a reason on its own. Together, they usually indicate whether the house still fits or whether the household is working around it.
The Capital Gains Question Nobody Raises Early
This is the single largest financial consideration in a long-tenure Long Island sale, and it routinely surfaces too late to do anything about.
Federal law excludes up to $250,000 of gain on a primary residence for a single filer and $500,000 for a married couple filing jointly. Those amounts have been fixed since 1997 and don't adjust for inflation.
A couple who bought in Nassau County in 1978 for $65,000 and sells today at $1.1 million has a gain that exceeds the joint exclusion substantially. The amount above it is taxed federally, taxed again by New York as ordinary income, and may attract an additional federal surtax depending on income.
The thing that most reduces that number costs nothing but time. Gain isn't the sale price minus the purchase price. It's the amount realized — sale price less selling costs — minus the adjusted basis, which is the purchase price plus every capital improvement made across decades of ownership. A kitchen in 1991, a roof in 2003, an addition, replacement windows, central air, a finished basement. Those add to basis and directly reduce taxable gain.
Forty years of receipts in a filing cabinet can be worth six figures. Finding them is unglamorous and it's the highest-return task available. The full treatment of how gain is actually calculated covers the mechanics.
One widow-or-widower provision worth knowing: a surviving spouse may be able to claim the full $500,000 exclusion for a limited period after a spouse's death, and the property may also have received a partial basis step-up at that time. Both are CPA questions and both have timing components.
Selling Versus Transferring to Children
Families considering keeping the house in the family should understand this before anyone signs anything.
A home inherited after death receives a stepped-up basis — its value resets to fair market value as of the date of death. A house bought for $65,000 and worth $1.1 million at the owner's death carries a $1.1 million basis for the heirs. Sold shortly after, the gain is minimal.
A home given during the owner's lifetime does not. The children receive the parent's original basis. That same house gifted rather than bequeathed carries a $65,000 basis, and a sale at $1.1 million produces a roughly $1 million taxable gain — with no primary-residence exclusion available to children who never lived there.
Parents transfer homes to children with entirely good intentions and frequently create an enormous future tax bill that doing nothing would have avoided. This is squarely an estate attorney and CPA question, and it should be asked before any transfer is contemplated. The walkthrough of an inherited house sale covers what happens on the other side.
What Happens to the Money and the Exemptions
Net proceeds are what actually funds the next chapter, and the number is smaller than the sale price by roughly seven to nine percent — commission, New York State Transfer Tax at four dollars per thousand, attorney fees generally $1,500 to $3,500, and preparation spending. Queens sellers add the New York City transfer tax on top. The full breakdown of what selling costs covers each line.
Property tax exemptions don't travel automatically. New York's Enhanced STAR exemption, available to qualifying homeowners 65 and over, is tied to a specific property and requires reapplication on a new one. Eligibility depends on income and other criteria that may differ at the new address, and there may be a gap between exemptions. The Senior Citizens Homeowners' Exemption, where it applies, works similarly. Worth confirming with the local assessor before assuming the tax picture at the new home.
A reverse mortgage on the existing home becomes due on sale and gets satisfied at closing. Where the loan balance exceeds the sale price, borrowers and heirs generally owe no more than the home's value — but the payoff mechanics should be confirmed with the servicer well before a closing date is set.
What 55+ Communities Actually Are
These come up constantly and are frequently misunderstood, so the structure is worth stating plainly.
An age-restricted community operates under a federal exemption to Fair Housing rules that otherwise prohibit age discrimination. Most commonly, a community qualifies by requiring that at least eighty percent of occupied units have at least one resident aged 55 or older, and by maintaining policies and verification demonstrating intent to house older residents. Some communities operate as 62-and-over, with stricter requirements.
The practical consequences: age verification is a real process, occupancy rules govern who else may live there — including adult children and grandchildren — and resale is limited to buyers who meet the same criteria, which affects both the buyer pool and future liquidity.
Financially, most are condominium or homeowners' association structures with monthly charges covering exterior maintenance, landscaping, snow removal, and shared amenities. Those charges replace some of what the seller was paying separately and are worth comparing directly against current carrying costs rather than viewed as an addition.
Note that co-ops are outside what this covers, and a buyer considering one should discuss the board approval process and associated fees with their attorney.
When Adult Children Are Involved
Most of these decisions involve family, and the practical questions get less attention than the emotional ones.
Who has authority to act. If a homeowner has granted a power of attorney, its scope determines whether the agent can list, sign a contract, or convey. A general power of attorney may not be sufficient for a real estate conveyance, and the buyer's title company has to accept it. This is a document to prepare well in advance, not to produce at closing.
Who decides when children disagree. The homeowner does, provided they have capacity. Adult children have opinions and often strong ones, but absent a legal arrangement they don't have authority. Where capacity is genuinely in question, that's a legal matter requiring counsel rather than a family negotiation.
How to keep the process from fracturing the family. The households that manage this well tend to do two things: they establish early who is participating in decisions and in what role, and they get professional answers to the financial questions rather than letting siblings speculate. Most family conflict in these sales comes from uncertainty rather than from disagreement.
A Worked Example
Consider a composite case — a Nassau County couple in their late seventies, in the same colonial since 1981, purchased for $78,000, with comps supporting roughly $1,050,000.
Their instinct was to transfer the house to their two children and move to a smaller place. Their CPA stopped that: gifted, the house would carry the $78,000 basis, and a future sale near $1.05 million would produce close to a million dollars of taxable gain for the children with no exclusion available. Inherited instead, the basis would step up and most of that gain would disappear.
They sold instead. Their daughter spent a weekend in the basement and found receipts covering a 1994 kitchen, a 2001 roof, a rear addition, windows, and central air — roughly $220,000 in documented capital improvements. Adjusted basis became about $298,000 rather than $78,000.
Against a sale at $1,041,000 less roughly $78,000 in selling costs, the gain came to about $665,000. The $500,000 joint exclusion left roughly $165,000 taxable — instead of the $385,000 that would have resulted without the records.
The weekend in the basement was worth more than anything else they did.
Where to Start
Find the improvement records before doing anything else — every receipt, contract, and permit going back to purchase. Talk to a CPA about the gain, the exclusion, and whether any transfer is being contemplated. Talk to an estate attorney if the house might otherwise stay in the family. Confirm with the local assessor what happens to exemptions on a move. If a reverse mortgage exists, call the servicer. Get a realistic read on value and net proceeds — a quiet look at current value is a starting point. Then decide the timeline, with family clear on who is doing what.
The Honest Bottom Line
Whether it's time is usually a question people have already answered privately. What they need help with is the arithmetic and the sequence.
Two things carry the most weight and both are available now, before any decision. The improvement records determine how much of a forty-year gain is taxable, and they're sitting in a basement somewhere. And the difference between gifting and bequeathing a home is large enough that no family should decide it informally.
There's no correct timeline. Some households move in three months, others take two years, and neither is wrong. What matters is that the financial questions get real answers before the emotional ones force a decision. Whenever the timing is right to talk it through, with no pressure either way, that conversation is available.
This is general information, not legal, tax, or financial advice. Capital gains treatment, basis calculation, exemption eligibility, and estate planning all turn on specific facts and change over time. Consult a licensed CPA, an estate attorney, and a New York real estate attorney about your circumstances.
FAQs
Will I owe capital gains tax on a home I've owned for decades?
Frequently yes, on Long Island, because the exclusion hasn't kept pace with appreciation. Federal law excludes $250,000 of gain for a single filer and $500,000 for a married couple filing jointly, amounts fixed since 1997. A home bought in the seventies or eighties and sold today often exceeds that. The most effective thing a seller can do is find records of capital improvements across the years of ownership — those add to basis and directly reduce taxable gain, and forty years of receipts can be worth six figures.
Should I give my house to my children instead of selling it?
This should not be decided without an estate attorney and a CPA. A home given during the owner's lifetime carries the owner's original cost basis to the children. A home inherited after death has its basis reset to fair market value as of the date of death. On a house bought for $65,000 and worth $1.1 million, that difference is roughly a million dollars of taxable gain — and children who never lived there have no primary-residence exclusion available. Parents create enormous future tax bills doing this with good intentions.
What happens to my STAR exemption if I move?
It doesn't transfer automatically. New York's Enhanced STAR exemption, available to qualifying homeowners 65 and over, is tied to a specific property and requires reapplication at a new one. Eligibility depends on income and other criteria that may differ at the new address, and there can be a gap between exemptions depending on timing. The Senior Citizens Homeowners' Exemption works similarly where it applies. Confirm with the local assessor before assuming what the tax picture looks like at a new home.
How do 55+ communities actually work?
They operate under a federal exemption to Fair Housing rules that otherwise prohibit age discrimination. Most qualify by requiring at least eighty percent of occupied units to have a resident aged 55 or older, along with policies and verification demonstrating intent to house older residents. Some are 62-and-over with stricter rules. Practically, age verification is a real process, occupancy rules govern who else may live there including family members, and resale is limited to qualifying buyers — which affects the future buyer pool.
Who decides when adult children disagree about selling?
The homeowner, provided they have capacity. Adult children frequently have strong opinions and, absent a legal arrangement, no authority. Where a power of attorney exists, its scope determines what an agent can do — and a general power of attorney may not suffice for a real estate conveyance, with the buyer's title company needing to accept it. That document should be prepared well in advance. Where capacity is genuinely in question, that's a matter for counsel rather than a family discussion.
By Eric Berman, REALTOR®, SRES® | The Eric Berman Team at Compass
Eric Berman | Long Island & Queens Associate Broker | Compass
1468 Northern Blvd, Manhasset, NY 11030
(917) 225-8596 | eric@ericbermanre.com | theericbermanteam.com
