Does the new Patient Protection and Affordable Care Act Taxes Affect your Real Estate Investment?
So, is there a new, 3.8% real estate tax, that is associated with the Patient Protection and Affordable Care Act, which the Supreme Court recently ruled on?
From emails I receive, along with Facebook posts I’ve seen, and questions that clients, friends and customers ask me, I sense that there is a great deal of confusion, along with misinformation, about this tax.
I won’t dare wade into the discussion about the merits of the law, but because of all the confusion about the tax, I can clarify that question.
First, to be clear, in actuality, the 3.8% tax, is not a real estate tax at all. It isn’t a transfer tax either. It is a tax that will apply to some investment income. Because,
under very specific conditions, it could effect some real estate transactions, it is important to understand how and when it will apply.
It is also important to note that the tax is complicated, so it is important to consult qualified professionals, either an accountant or tax attorney, if you are worried that the tax may effect your personal situation.
This tax will not be imposed on all real estate transactions, which is a common misconception. When the legislation becomes effective in 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses).
The tax will fall only on individuals with an adjusted gross income above $200,000 and couples filing joint returns with more than $250,000 adjusted gross income.
I have a report, with lots of examples, along with frequently asked questions about the tax. Here is a quick example, based on the sale of a primary residence. From this
example, hopefully you can see the sort of impact that tax may or may not have, on real estate sales.
John & Mary sell their principal residence for 1.2 million. They realize a gain of $525,000. They have $325,000 adjusted gross income, before adding this taxable gain.
The tax applies as follows:
Here is another important note: If John and Mary had a gain of less than $500,000 on the sale of their house, none of that gain would be subject to the 3.8% tax. Whether or not they paid the 3.8% tax would depend on the other components of their 325,000 AGI.
This is just one of many examples, in the report I can send. The report also addresses many of the most frequently asked questions.
If you would like a copy of the report, please send an email to:
Hopefully this has cleared up a few misconceptions of this element of the health care act.Continue Reading > Add a Comment