ObamaCareTax and Real Estate. Say what?

ObamaCareTax is that monstrosity that Congress had to pass in order to find out what is in it. So far, in addition to the over 2000 pages, another 13,000 pages have been added. Most of what the media pundits are discussing is whether to call it a penalty or a tax. That only applies to the “mandate”. Few are mentioning that there are 21 taxes in addition to the mandate. Read the list of 21 taxes.

One of those 21 Taxes includes a tax that was designed to affect upper income taxpayers. Here’s what the National Association of Realtors® said in an email to all Realtors®:

The 3.8% tax will go into effect in 2013. It is imposed only on those with more than $200,000 of Adjusted Gross Income (AGI) ($250,000 on a joint return). The tax applies to investment income, defined as interest, dividends, capital gains and net rents. A formula will determine what portion, if any, of these types of investment income would be subject to the 3.8% tax.

Initially there was some confusion, and some misinformation was distributed around the Internet. The tax is NOT a transfer tax on real estate sales and similar transactions. The new tax does NOT eliminate the benefits of the $250,000/$500,000 exclusion on the sale of a principal residence. Thus, ONLY that portion of a gain above those thresholds is included in the AGI and could be subject to the tax. The amount of tax will vary from individual to individual because the elements that comprise AGI differ from taxpayer to taxpayer.

You should consult with your accountant to see whether, or to what extent, this law will have on your Federal Tax Form if it stays in effect during this election year.

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