27 Aug How Health Care Could Impact Real Estate in 2013
A new 3.8% surtax, or “transfer tax,” that takes effect on January 1, 2013 could impact certain real estate transactions next year. There has been a lot of discussion about this new surtax and how health care could start to impact real estate, but understanding the facts will help put a lot of home owners at ease.
First of all, the tax is not likely to affect the majority of people who sell their homes in 2013. For those with an adjusted gross income of less than $200,000 as a single filer, or $250,000 for couples filing together, more than likely, you won’t be affected. And even if your income exceeds those levels, you may be able to get around the 3.8% surtax too, especially if your income is solely earned. Those with dividends, interest, net capital gains, and net rental income are those who need to worry the most, as that is who the new law is targeting.
There is one unique situation to be aware of though for home owners with an AGI above the $200,000 and $250,000 thresholds. If you fall into this bracket and sell your home for a substantial profit, you can still take advantage of the first $500,000 (joint filers) or $250,000 (single filers) in tax-free gains on the sale of your principal home. Any profit above these limits, however, could subject you to the 3.8% surtax.
The best way to determine if you’re liable for the 3.8% surtax is to speak with a tax professional regarding your specific situation, however, you can help yourself. One way to stay in front of this impending surtax is to keep a good paper trail. Keep any documentation or receipts regarding capital improvements, house expenses, settlement or closing costs, title insurance and legal fees, etc… that you pay out because these items increase your tax basis and help lower your capital gains.
To learn more about this topic, please visit: http://www.latimes.com/business/realestate/la-fi-harney-20120715,0,7914992.story