New Real Estate Tax – Effective 2013
There is a new Real Estate Tax taking effect in 2013. Here is the real scoop on the health tax…
Government Affairs Relating to New Real Estate Tax
3.8% Tax Will Go Into Effect in 2013
Now that the U.S. Supreme Court has upheld the health care legislation, all of its major provisions remain in effect, including the new tax that was designed to affect upper income taxpayers. The 3.8 percent tax is imposed only on those with more than $200,000 of Adjusted Gross Income (AGI) ($250,000 on a joint return). The tax applies to investment income, defined as interest, dividends, capital gains and net rents. These items are all included in an individual’s AGI. A formula will determine what portion, if any, of these types of investment income would be subject to the tax.
The tax is not a transfer tax on real estate sales and similar transactions. Not long after the tax was enacted, erroneous and misleading documents went viral on the Internet and created a great deal of misunderstanding, making the tax into something far more draconian than stated in the actual provisions. The new tax does not eliminate the benefits of the $250,000/$500,000 exclusion on the sale of a principal residence. Only that portion of a gain above those thresholds is included in AGI and could be subject to the tax.