Real Estate News
Just the Facts: Does the Obama Health Care Plan really impose a new 3.8% tax on Real Estate Sales? I get this question a lot and felt it would be good to clarify. As always, I went to the professionals with the training and education to clarify my question. Amy Vo with St. Johns Law Group, Scott Pacetti with Cowan & Pacetti and the National Association of Realtors information brochure provided the answers. The new tax takes effect in 2013 and was passed to fund the Health Care and Medicare overhaul plans.
Peggy Gachet The most important thing to know is that not all real estate transactions will experience the 3.8% tax and will only affect those individuals with an adjusted gross income (AGI) of $200,000 per year (or couples with $250,000 filing a joint return). Any investment income amount received above the AGI threshold will be accessed an additional 3.8% above and beyond any other taxes that may apply. Should you sell your primary home with a gain of250,000 as an individual or 500,000 as a married couple (or under) there will be no taxable consequence as a result of that sale. Any gain on the sale of a second home that is not used as rental property will be treated like all income sources. If your AGI (including any gains from the sale) exceeds the thresholds above, the new 3.8% tax will apply to the overage.
With prices so low and rent rates on the rise, many people have purchased rental properties of late. It will be as important as ever to keep up with all expenses related to that investment property. The 3.8% tax will apply only to the income generated in excess of the AGI thresholds listed above. Remember net income figures apply, not gross. Yet another twist exists for investment property treated as a business. In that case a totally different tax structure is used. The same will apply to resort rental condos. Confused yet? If you’ve always done your own taxes, you may want to consider using Scott Pacetti or another qualified CPA starting in 2013. Of course, Amy Vo or another good real estate attorney can guide on the benefits of using a Trust, changing of the Title, etc.
Advance planning will be especially important if you plan to sell investment property in the future. They can help guide you on timing, structure and the benefits of using a 1031 tax exchange plan that could make a huge difference in the tax liability of that sale.
There are about 20 different scenarios listed in a brochure provided by our National Association of Realtors. It is impossible to cover all situations in the space allocated. If you’d like to receive a copy of the brochure, please call me at 904 377 0832. It can be mailed or sent as a link.
Peggy Gachet is a Broker Associate with Watson Realty’s Beach office and resident of Marsh Creek.
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