Some Good Information on the 3.8% Tax for Home Sellers in Marina del Rey – Marina del Rey Real Estate
Is There a 3.8% Tax for Home Sellers In The New Health Care Bill?
We continue to hear questions and suggestions that there is a possible 3.8% tax which will be applied on all home sales beginning in 2013. We would like to do our best to clarify confusion for everyone. We are a real estate firm and not accountants and give you this information just as our understanding and answers to this misconception. Please understand that when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information.
Some background on this misconception
The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence – or to the first $500.,000 in the case of a married couple selling their home.
We can understand how this misconception got started. The law itself is couched in highly technical language that only a qualified tax expert can fully understand. ( The provision begins on page 33 of the reconciliation bill that was passed and signed into law. ) It does say that tax falls on “net gain … attributable to the disposition of property.” That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is “taken into account in computing taxable income” under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence ( or $500,000 in the case of a married couple) is excluded from taxable income already.
Here is a Simple Explanation
The tax will affect those sellers of real property who will be otherwise taxed on capital gains under current tax laws. Under current laws, if you sell your primary residence and meet the “time” criteria, you are exempt up to $250,000 or $500,000 (filing individually or jointly). Any amount realized over that amount is taxable under current tax schedules based on income. As such, this new tax will apparently be added to the current capital gains tax burden IF your income is over $200,000/$250,000. For those selling second homes and investment properties, the tax, once again, will be applied to the amount of gain realized.
We offer this just as an explanation. Please remember, when it come to IRS regulations, you should check with your accountant for the most accurate and up-to-date information.
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