3.8% Federal Transfer Tax that goes into effect January 2013.
The simple facts are:
â€¢Â Â Â Â Â Â Â Â Â Â 3.8% Tax
â€¢Â Â Â Â Â Â Â Â Â Â Applies on any gainÂ over theÂ $250,000 single or $500,000 married capital gain exclusion
â€¢Â Â Â Â Â Â Â Â Â Â Applies only to households with AGI of $200,000 single and $250,000 married
â€¢Â Â Â Â Â Â Â Â Â Â Any revenue is dedicated to the Medicare hospital insurance program
â€¢Â Â Â Â Â Â Â Â Â Â Effective January 1, 2013
Â Let us sum up: The health bill included a provision thatÂ imposes a new 3.8 percent Medicare tax for some high-incomeÂ households that have â€œnet investment income.â€Â Any revenueÂ collected by the tax is dedicated to the Medicare hospitalÂ insurance program.Â This new tax applies only to households with Adjusted GrossÂ Income (AGI) of more than $200,000 for individuals or moreÂ than $250,000 for married couples. Since capital gainsÂ are included in the definition of net investment income,Â an additional tax obligation mightÂ result from the sale ofÂ real property.Â Even if the AGI limits are met, the new tax would not beÂ applied to capital gains that result from the sale of a home,Â Â since the existing home sale capital gains exclusion rule stillÂ applies â€“ $250,000 (individual)/$500,000 (couple). So if theÂ gain from the sale of the primary residence is below thatÂ amount, then NOÂ Medicare tax will have to be paid on theÂ gain. The new Medicare tax would apply only to a home saleÂ gain realized in excess of the $250K/$500K that pushes theÂ filerâ€™s AGI over the $200K/$250K income limits.
Some other quick points:
â€¢Â The new Medicare tax will take effect January 1, 2013.
â€¢Â The legislation makes no changes to the mortgageÂ interest deduction.
Please feel free to contact me with specific questions and scenarios.
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The Bremner Group at Coldwell Banker
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