You may have heard rumors about a 3.8% seller real estate tax to begin in 2013 and wondered if there was any truth to it.
Simply put, these rumors are a mixture of fact and fiction: When people refer to the “Medicare Tax”, they are talking about the tax provision of the Patient Protection Affordable Care Act (PPACA), a piece of health care legislation. This provision of the legislation is an investment income tax, not a sales tax on the sale of real estate. It may mean that a small percentage of home sellers who fit very narrow parameters might pay additional taxes on the profits of home sales that exceed a designated threshold amount.
Who exactly will be affected by this tax? Only those taxpayers BOTH designated by the provision as “high earners,” AND who sell their homes at a substantial profit. “High earners”, according to the new law, are those who earn $250,000 (for married couples filing jointly) or $125,000 (for couples filing separately), or $200,000 (for all others).
The tax affects only those “high earners” who will see a substantial profit from the sale of their property, but this situation is uncommon. Why is this? Profit, according to this statue, will be calculated not on the basis of sales price. Rather, it will be adjusted to reflect existing capital gains exclusions for primary residences. The existing home sale capital gains exclusion on a principal residence is $250,000 for individuals and $500,000 for couples. No “Medicare Tax” will apply to gains within these limits.
If you feel that you may be among the few who must pay this new investment tax, you may want to consider selling before the law goes into effect in 2013. It is always best to consult with an accountant and/or tax attorney before making any decisions.
Reposted from Windermere RE Blog, thanks Edward Klingman……… good info to something we’ve heard about!