Taxing My Home Sale? I need details!!
The Health Care Bill recently signed into law by President Obama had a little known provision that levies a 3.8% Medicare tax on the proceeds from the sale of your home. So does this mean that everyone is going to have to pay this 3.8% Medicare Tax on their home sale? The answer is maybe yes, maybe no but yet possibly. Put mildly this answer sounds like a government “maybe”. But this answer would be iffy. Provisions in the Health care Bill are just now coming to light after more people are performing detail examination. For an individual selling their home more information has to be known to determine if the tax applies.
How to Know if You’re Hit by the Taxman
It isn’t until 2013 that the new Medicare Tax starts for home sales. So it will be a while to even concern yourself. When the new provision does take place it will not apply to all homes being sold. The taxpayers it applies to have adjusted gross income of $250,000 if married filing joint or $200,000 for individuals. That takes a number of taxpayers out of the eligibility factor immediately. The next factor to be considered is that the capital gains exclusion on home sales still applies. That is $500,000 and $250,000 of gain is exempt if filing as married joint or as individuals respectively. Now if you can’t get through these two hurdles then the Health Care Bill provides that the 3.8% tax is imposed on your “net investment income”. This is easy right? The good news is that many people will be excluded from this new tax based on income and excess home gain on the sale.
Explain A Little More Please
First a review of the present rules for excluding the gain on the sales of principal residences.
- 1. The house must be your main residence and you must have owned and lived in the home 2 out of the prior 5 years.
- When you sell your home and you have a gain you can exclude the amounts as shown in the preceding paragraph. Keyword here is gain not home sale proceeds. The gain is computed by taking the proceeds of the sale and applying certain allowed adjustments then reducing this amount by the adjusted basis of the home you sold. You can refer to IRS Publication 523 to compute the adjusted basis of the home you sold. If you still have a taxable gain after you calculate the adjusted sales proceeds minus the adjusted basis of the home and then minus the allowable exclusion, then this remainder could be subject to the 3.8% Medicare tax.
But even then this new Medicare Tax on the home gain refers to including the residence gain in a household’s “net investment income”.
Thus One More Explanation Is Necessary
So there might be a little more reduction on this home gain tax? Well again yes or no but possibly. So for simplicity purposes let’s examine “net investment income”. The real worry can kick start in 2013. So if you are planning on selling you Gainesville Fl home, you have time!
IRS Form 4952 states that your gross income from property held for investment can be reduced by investment expenses resulting in net investment income. The point is that the home gain that is lumped in with other gain on investments might be adjusted for certain expenses and the difference or net will then be subject to the new 3.8% Medicare tax. Just be aware that there is a new tax on the gain on certain home sales possibly looking for you!
You can get more information on this by visiting Gainesville Fl Home. Your source for Gainesville-Florida-Realty and other real estate topics for the public interest!
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Posted under Selling a Home in Today's Market
This post was written by admin on September 6, 2010

