Triangle Area Real Estate News & Information

This morning I received an email from another Realtor asking me what I knew about the upcoming 2013; 3.8% Federal sales tax on real estate sales. My guess is that they or one of their clients received either an email or mail flier warning of dire consequences to homeowners who might be selling their home in the future.

I've seen this a version email and honestly found it insulting to my intelligence as well as poorly written, false in it's assertions and essentially more of the usual Tea Party/ Republican sponsored nonsense designed to frighten people in advance of the upcoming election. I believe that that everyone is entitled to vote from whomever they wish, whether I agree with them or no. That's part of living in a democracy, however I'm not in favor of either party flat out lying and trying to scare people with misinformation in their zealous efforts to win an election. I like to think that most Americans are bright enough that if you give them the unvarnished facts about a subject, they can make up thier own minds and vote accordingly.

As part of the recently legislated healthcare law, there will be a 3.8% tax levied on the sale of INVESTMENT property sold after the end of 2012. This is a Medicare tax on investment income only and will not be levied on the sale of your primary home. Below is an excerpt from an article posted in the News and Observer which goes into more detail on this subject.

If you have any questions about things you hear regarding real estate sales, please don't hesitate to ask them here on my Blog, I'll do my best to answer them for you without all the hype.

What You Really Need To Know About The 3.8% Tax Increase

The 3.8 percent tax is not a sales tax; it is a Medicare tax on investment income starting in 2013. It is a provision of the Patient Protection Affordable Care Act, health care legislation. Congress passed the legislation, and this new tax is seen as a way to help fund President Obama's health care and Medicare plans. The health care plan could be repealed or changed, but even if this happens, some experts expect a similar tax to take its place because of the budget deficit.

The 3.8 percent tax on investment income will apply only to those single taxpayers with modified adjusted gross incomes above $200,000, married taxpayers filing jointly with MAGI above $250,000, and taxpayers married filing separately with MAGI above $125,000. This is in addition to the new increase in the hospital insurance, commonly referred to as the Medicare payroll tax, for these same taxpayers. The hospital insurance tax is equal to 1.45 percent of covered wages with no wage cap. Beginning in 2013, an additional 0.9 percent will be added to any covered wages exceeding $250,000 for those married filing jointly, $200,000 for single filers, and $125,000 for those married filing separately.

For primary home sales, the entire exemption on capital gains remains intact for all taxpayers. As with all legislation, this could change, but right now the $250,000 capital gains exclusion for single taxpayers and the $500,000 for those married filing jointly remains and can be claimed every two years. The 3.8 percent Medicare tax is on the lesser of net investment income or MAGI that exceeds $200,000 if single, $250,000 married filing jointly and $125,000 married filing separately.