Wednesday, February 8, 2012

A QUESTION ON THE 2013 OBAMA CARE 3.8% MEDICARE SURTAX

A few people have asked me about the 3.8% Medicare surtax that starts after 2012. This is the tax that was created by Obama Care. One recurring question is, “Will there be an additional tax of 3.8% when I sell my personal residence?” Apparently the blogs or some news reports have stated that there will be an additional tax when you sell your home. The good news is that the surtax won’t apply to all home sale profits after 2012. Most gains on sales of primary residences will be exempt. Only the portion of profits that exceeds the $250,000 or $500,000 exclusion will be subject to the tax.

Additionally, only higher income taxpayers will be subject to the tax. For now, the tax only will apply to singles with adjusted gross incomes over $200,000 or joint filers with AGIs above $250,000.

Here is a brief overview of the tax that comes into place after 2012: The 3.8% surtax is levied on the smaller of the filer’s net investment income (including taxable capital gains) or the excess of the taxpayer’s adjusted gross income over the threshold amounts. This will include profits on sales of rental properties and second homes, assuming that the adjusted gross income is large enough.

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