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@seadoug,
@Blessed,
@PeppermintPatty and
@Babs2u, I have concerns about ballooning labor and material costs for home maintenance costs.
Our 70 year old house is paid off and property taxes are reasonable thanks to Proposition 13, but we're now at the end of rainy season and need to arrange getting the outside trim painted and rain gutters repaired.
The roof is still in good condition, but for how many more years? Ditto our HVAC system.
Downsizing makes no sense, at least not as things stand with the tax code. We bought this house 40 years ago and it has appreciated considerably over that time. Same is true for any house we'd consider buying.
Whether we cashed out or immediately bought another house for exactly the amount we sold this one for, even with the $500K tax exemption, we'd be looking at a combined state and federal income tax tab of well over $100K.
The supreme irony? If we keep it until we die, (tying up a 4 bedroom house for 2 people), our children can sell the house and inherit the full proceeds, tax free. My in-laws and my mom didn't sell their homes for the very same reason.
Go figure the wisdom of our government...