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Deborah Bremner's Blog

By Deborah Bremner | Agent in 90049

Selling your high end home in 2013? New transfer tax law.

3.8% Federal Transfer Tax that goes into effect January 2013.
The simple facts are:

•          3.8% Tax
•          Applies on any gain over the $250,000 single or $500,000 married capital gain exclusion
•          Applies only to households with AGI of $200,000 single and $250,000 married
•          Any revenue is dedicated to the Medicare hospital insurance program
•          Effective January 1, 2013

 Let us sum up: The health bill included a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have “net investment income.” Any revenue collected by the tax is dedicated to the Medicare hospital insurance program. This new tax applies only to households with Adjusted Gross Income (AGI) of more than $200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition of net investment income, an additional tax obligation might  result from the sale of real property. Even if the AGI limits are met, the new tax would not be applied to capital gains that result from the sale of a home,  since the existing home sale capital gains exclusion rule still applies – $250,000 (individual)/$500,000 (couple). So if the gain from the sale of the primary residence is below that amount, then NO  Medicare tax will have to be paid on the gain. The new Medicare tax would apply only to a home sale gain realized in excess of the $250K/$500K that pushes the filer’s AGI over the $200K/$250K income limits.
Some other quick points:
•  The new Medicare tax will take effect January 1, 2013.
•  The legislation makes no changes to the mortgage interest deduction.
Please feel free to contact me with specific questions and scenarios.

Deborah Bremner
The Bremner Group at Coldwell Banker
REALTOR, 00588885, 
ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT

Comments

By Allan Erps,  Thu Feb 9 2012, 20:24
Hopefully the government we presently have will be replaced by ideas that make more sense.
 
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