The Dreaded 3.8% – It’s Not What You Think!
October 13, 2012 In Uncategorized
January 1, 2013 approaches, it is time to understand the new Medicare tax.
There is NO new blanket sales tax on real estate transactions.
The 3.8% Medicare tax is not a sales tax, nor does it apply to all real estate transactions.
What it actually is, is a tax on Investment Income [ income which may or may not derive from the sale of real estate] and it only applies to persons who earn a specific high level of income.
1] The tax will be imposed only on individuals with an income above $200,000 and couples with a joint income more than $250,000.
2] The tax will not be imposed on every house sale, but only on real estate transactions that produce profits over a specified dollar amount.
If you sell your home for a profit above the capital gains threshold of $250,000 per individual or $500,000 per couple, then you would be required to pay the additional 3.8% tax on any gain realized over this threshold.
It is a complicated piece of legislation; whether or not it applies to the sale of your home will depend on your income, and the manner in which you prepare your income tax return. You should consult with a qualified tax professional who is familiar with your personal situation to determine your potential exposure.
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