Is There Really A New Tax On My Home Sale?

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. Now the question is “Does this affect the proceeds from the sale of my home?” The answer is maybe yes, maybe no but yet possibly. Sounds like an answer from a government worker. But this answer would be iffy. Like many provisions in the Health Care Bill, as more details become available more analysis is required to really know how this new 3.8% Medicare tax applies to a home being sold.

How to Know if You’re Hit by the Taxman

Well the bottom line is that the new 3.8% Medicare tax on a home sale takes effect in 2013. 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. To be eligible for this tax you have to have in excess of $250,000 of adjusted gross income if married filing joint or $200,000 filing as individual. That could have quite a few people escape right there. 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. After all these exclusions and you still are subject to the tax you might have hope because it is imposed on your “net investment income”. This is easy right? The good news is that many taxpayers will escape the new 3.8% Medicare Tax on the home sale.

Explain A Little More Please

It would be good to go over the present rules of excluding gain on the sale of your principal residence.

• 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.
• 2.    If you have a gain from the sale of your main home you can exclude certain amounts of the gain as discussed in the above paragraph. The important term is gain on the home sale and not the proceeds. In order to compute the gain you start with the sale proceeds from the house and reduce this sum by allowed adjustments and then reduce this number by the adjusted basis of the home sold. You can refer to IRS Publication 523 to compute the adjusted basis of the home you sold. However, if you still have a taxable gain after you calculate the adjusted home sale proceeds minus the adjusted basis of the home minus the allowable exclusion, first congratulations, then this remaining gain could be subject to the new 3.8% Medicare tax.

Yet this new tax applies to the gain on the residence that in included in the “net investment income”.

Thus One More Explanation Is Necessary

So there may be an allowed further reduction on the gain from the home sale? 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. So the gain from the sale of the home is mingeled with other gains on their investment and then is reduced for investment expenses. The difference will be subject to the new 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!