The Jacksons are considering selling their current residence, buying a small home near Averys parents for $220,000 with a $100,000 30-year mortgage at 3.5%, and investing the net proceeds in their retirement accounts and education accounts. They assume they will incur 2% in transaction costs for the purchase and 6% for the sale. They have asked you the following:

What will be their payment (principal and interest only) on their new home?

How much will they be able to invest in their retirement accounts and education accounts after selling the old house and buying the new house?

If the Jacksons purchase the new house one year from today, what will be the balance on their mortgage when they retire?

What is the income tax consequence of their sale and purchase strategy?

Case Facts: Current Residence worth is $330,000 with current mortgage of $60,000 Age: 49 Retire: Age 65

Tax Bracket is 12%. They have owned the home for 10+ years, so the couple qualifies for the 500k personal exclusion.

TAX BRACKET IS 12%. THERE SHOULD BE NO TAX IMPLICATIONS DUE TO THE PRIMARY RESIDENCE EXCLUSION ON THE PROFIT OF SALE.