Tallahassee Real Estate Blog

Recently there has been quite a bit of online discussion and chain email regarding the new 3.8% Medicare tax and how it relates to home sales and capital gains.  The following is a summary of information from the National Association of Realtors.  In short, this tax will not affect most Tallahassee homeowners selling a primary residence.

Summary Points: 

Recent health care reform legislation includes a new 3.8% Medicare tax on "unearned income" of "high income" taxpayers beginning in 2013.

High income taxpayers are defined as single filers with Adjusted Gross Income (AGI) of more than $200,000, and married couples filing a joint return with AGI of more than $250,000.  Unearned income is the income that an individual derives from investing his/her capital. It includes capital gains, rents, dividends and interest income.

In selling a primary home, the new Medicare tax would apply only to any gain that is more than the $250,000/$500,000 existing primary home exclusions, and only if the seller has AGI above the "high income" $200,000/$250,000 AGI thresholds.

As an example, if you and your spouse sold your Tallahassee home for a $530,000 gain ($30,000 above the exemption amount), and your adjusted gross income as a married couple was $180,000 (below the $250,000 threshold), the 3.8% Medicare tax would not apply to this sale.  But if you and your spouse had an AGI of $290,000 (above the threshold) the 3.8% tax would apply to the $30,000 taxable gain (not to the whole sale amount.)

Vacation homes and investment property are a little more complicated to summarize here.  If you have questions about these, please contact me with your general situation, and I can provide the basic info.  As always, you should contract your tax professional for specific tax planning.  I will gladly work with your tax advisor to accomplish the tax outcome you desire.

Terance

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