New Tax 2013 – Medicare Tax – the 3.8% Investment Tax 2013

Effective January 1, 2013 the new Medicare Tax went into affect and will apply to your 2013 tax return.

Sometimes it is referred to as the 3.8% Real Estate tax or the or the 3.8% Investment Tax. A lot of misinforamtion has been floating around about the 3.8% Investment Tax. Now that it is in effect, it is time to get the facts about the 3.8% Real Estate tax. This TAX is part of the Health Care and Education Reconciliation Act of 2010 and is designed to help fund Medicare. Another way of thinking about these new taxes is to think of the 3.8% tax as being imposed on a portion of the money that you make on your money — your capital (sometimes referred to as “unearned income”)

#1 - This is an "INVESTMENT RELATED TAX" and only affects you if you add up all your income from every possible source and your total income is more than $200,000 for a single individual or $250,000 for a couple. So if you have as an example $210,000 in income, you will ONLY be taxed on $10,000.

#2 - This tax an "INVESTMENT RELATED TAX" and is not just related to real estate - it is also applicable for capital gains, interest income, dividend income, and net rents. So why do we keep hearing it referenced as a real estate tax? Because non-earned / captial gains often are from the sale of real estate or real estate investment propertis.

#3 - The 3.8% Investment Tax 2013 does not apply to Buying a home - it only to selling a home and only if your income is over the $200,000 for a single individual or $250,000 for a couple.

#4 - Keep in mind that this is a "profit" related tax. If you sell your principal residence, you will still receive the full benefit of the home-sale exclusion. You will not pay this tax if you are single and have a profit less than the alotted $250,000 profit or if you are married and filing a joint return and have a profit less than the $500,000 alotted profit. The question to ask is: "Is your capital gain greater than $250,000/$500,000 amount?" AND "Is your total total non-earned income amount greater than the $200,000 / $250,000 alotted amount?". What does this mean? To learn more about this read the article by Nolo.com - The $250,000/$500,000 Home Sale Tax Exclusion.

#5 - For rental properties, the tax could apply to the NET RENTAL INCOME - gross rents minus the expenses (depreciation, interest, property tax, maintenance and utilities)

To see examples where the 3.8% real estate tax could apply, review this phamplet from NAR - the National Association of Realtors:
http://www.realtor.org/small_business_health_coverage.nsf/docfiles/government_affairs_invest_inc_tax_broch.pdf/$FILE/government_affairs_invest_inc_tax_broch.pdf

Then when you are ready to sell your home, call someone who understands your financial needs - call me ... Jason Gracey at Vintage RE/MAX at at (281) 376-2755. Experience makes all the difference. Check out my sales for 2012: http://greathoustonproperties.com/jason-gracey