Posted on 08/19/2010 9:22:30 AM PDT by george76
Rumors are flying that the health-care legislation Congress passed this year will impose a sales tax on all real estate sales. But the rumors are based only partly on fact. Although there is a new tax, it will not apply to everyone, and existing tax breaks for home sales will remain in place.
The Health Care and Education Reconciliation Act of 2010, which President Obama signed into law March 30, is comprehensive and complex. Section 1402, "Unearned Income Medicare Contribution," imposes a 3.8 percent tax on profits from the sale of real estate -- residential or investment.
But the levy is aimed at high-income taxpayers, leaving most people untouched. And it will not take effect until Jan. 1, 2013.
How is the tax calculated? Through a complex formula that could be called "the accountants' protection act." As a taxpayer, you (or your financial adviser) must determine which is less: the gain you have made on the sale of your house, or the amount by which your income exceeds the appropriate threshold.
Complicated? Yes...
The new law has not been widely analyzed or interpreted, and it won't go into effect for about 2 1/2 years. However, since the law applies to all forms of real estate, including vacation homes, you should consider consulting with your tax and financial advisers regarding your exposure.
(Excerpt) Read more at washingtonpost.com ...
only partly on fact. Although there is a new tax, it will not apply to everyone
Is that some kind of argument? I guess I should be for higher income taxes since they don't apply to everyone.
Whew! What a relief.
Like the ATM tax : It also started as a tax only-on-the-rich.
Then, it will hit the middle classes too
Once again the Washington Compost lies through it’s teeth. In this case, by omitting some inconvenient facts.
The 3.8% Obamacare tax is a new tax surcharge on *ALL* non-wage income! Tax *RATES* will rise nearly 60% on capital gains taxes and nearly 300% on dividends when you include the new 3.8% Obamacare tax surcharge levied on all non-wage income and the expiring Bush tax cuts.
Bottom line, no one knows what this will mean for the sale of a home 2 1/2 years from now, who it applies to, or how it will be calculated.
The provision in the bill, like all the rest of the provisions, are basically empty vessels into which nameless, faceless, unaccountable bureaucrats pour their utopian wealth confiscation and redistribution dreams. They’re the ones who decide how this work, and they haven’t even had time get started on it.
Existing tax
Yes. Thank you.
referring to AMT
Un-earned income,,,does that include private pensions and Soc,Sec. income too? Boy, these democRATS know how to pour it on the little guy, don’t they.
“Un-earned income,,,does that include private pensions and Soc,Sec. income too? Boy, these democRATS know how to pour it on the little guy, don’t they.”
SS & pensions are already taxed as ordinary income.
I found this about the 3.8% tax:
Reader Chuck asked about the 3.8% Medicare tax in the health care reform law.
“Does the 3.8% tax on unearned income kick in all at once? You could be looking at an infinity percent marginal rate if you have, say $199,999 in wage income, and $50,000 in capital gains if one extra dollar of income costs $1900 in tax, for example.”
The most definitive answer has to come from the law itself. The law containing this provision is HR 4872 Health Care and Education Reconciliation Act of 2010 (full text in PDF). The Act says in Sec. 1411 (page 33 in the PDF, bold emphasis added by me):
“(a) IN GENERAL. – Except as provided in subsection (e) –
(1) APPLICATION TO INDIVIDUALS. In the case of an individual, there is hereby imposed (in addition to any other tax imposed by this subtitle) for each taxable year a tax equal to 3.8 percent of the lesser of –
(A) net investment income for such taxable year, or
(B) the excess (if any) of –
(i) the modified adjusted gross income for such taxable year, over
(ii) the threshold amount.”
The threshold amount in Sec. 1411(a)(1)(B)(ii) is the $200,000 single, $250,000 married filing separately number widely reported in the media.
The net investment income in Sec. 1411(a)(1)(A) includes interest, dividends, annuities, royalties, rents, and capital gains. Distributions from qualified plans or IRAs are not included. It does not make any distinction between qualified and ordinary dividends or between short-term and long-term capital gains. All dividends and capital gains are subject to the new Medicare tax equally.
Because interest from muni bonds is not part of the modified adjusted gross income, it will not be affected by this new Medicare tax.
Here are two examples for a married couple filing jointly with $260,000 in modified adjusted gross income (both earned and unearned):
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