This tax WILL NOT be imposed on all real estate transactions, a common misconception.
How will the tax impact your investment properties?
Any gain on the sale of a second home would be added into the tax filer’s adjusted gross income, because the capital gains exclusion doesn’t apply. But, again, the tax wouldn’t kick in if the tax filer’s income remains under the threshold, which is $200,000 for individual filers and $250,000 for joint filers. And other considerations come into play before you can determine whether the tax will apply in the end, which is why consulting a tax professional is important.
How will the tax impact you should you sale your primary home?
For households that see a gain of more than the current $250,000-$500,000 exclusion (that’s $250,000 for single filers and $500,000 for joint filers), only the amount above the exclusion would be factored into the tax calculation, and that would still only apply to high-income households, which the law defines as single people earning $200,000 a year and joint filers earning $250,000 a year.
So, if you are a households with annual income of $250,000 or more and you earn a gain of more than $500,000 on your house (again, that’s after the $500,000 exclusion), any amount of gain above the exclusion would be plugged into a formula to see if it’s taxable. If it turns out that it’s taxable, then the amount could be subject to the 3.8 percent tax.
The other thing about the tax worth noting is that, although it takes effect in 2013, any impact on taxes wouldn’t happen until 2014. That’s because the tax filer would do the calculation in 2014 for the 2013 tax year. Because it’s not a tax on a real estate sale but rather on a capital gain, it’s not calculated at the time of an asset sale, whether that asset is a house or something else. It’s calculated at the time the filer figures his or her tax.
A COUPLE OF EXAMPLES TO HELP ILLUSTRATE THE 3.8% TAX
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