Obama Care and Real Estate Sales

Under ObamaCare, some Realtors mistakenly advise that if you sell your house after 2013 you will have to pay a 3.8%  tax on the sale. This is an real estate myth I want to debunk. This tax will apply to joint filers with adjusted gross income of $250,000 which recognize a gain on unearned income. This equates to less than 5% of filers. Couples who sell their personal home can already exclude the first $500,000 from tax.

On March 23, 2010 President Obama signed the Patient Protection and Affordable Care Act into law. More recently, it was upheld by the US Supreme Court.

  In brief beginning January 1, 2013 Obama Care imposes a 3.8% Medicare tax on UNEARNED INCOME which may include a gain on the sale of real estate but that gain would have to push your income over $250,000 (or AGI of $200,000 for individuals).

‘‘SEC. 1411. IMPOSITION OF TAX.

‘‘(a) IN GENERAL.—Except as provided in subsection (e)—

‘‘(1) APPLICATION TO INDIVIDUALS.—In the case of an individual, there is hereby imposed (in addition to any other tax imposed by this subtitle) for each taxable year a tax equal to 3.8 percent of the lesser of –

(A) net investment income for such taxable year, or

(B) the excess (if any) of –

(i) the modified adjusted gross income for such taxable year, over

(ii) the threshold amount.”

(The threshold amount in Sec. 1411(a)(1)(B)(ii) 200,000 single, $250,000 married filing separately.)

Note also that:

1) Only *net* investment income and *MGA* income over the exempt amount is taxed.

2) Distributions from qualified plans or IRAs are excluded.

3) Only the income *in excess* of the exempt amount is taxed.

If you live in and own a home for 2 of the 5 years before you sell, the first $250,000 in gain ($500,000 if married) is completely tax free. A gain is not the same as the selling price. The gain is any profit you made on the sale. Read more at Realtor.org

Posted via email from el paso homes posterous