Good.....................Bad................wha‘th a ?
Fact check: Investment income tax only affects ‘high earners’
JACKSONVILLE, Fla. – May 24, 2010 – Times-Union readers want to know: Is it true that all real estate transactions are subject to a 3.8 percent sales tax under the new health care law? That means if you sell your $400,000 home, you'll have to pay $15,200 in taxes!
Answer: It's true that the new health care act imposes a 3.8 percent Medicare tax.
But it doesn't affect the great majority of us.
The 3.8 percent tax is frequently misinterpreted as a "sales tax" on all real estate transactions. It isn't. But because the health care law (The Patient Protection Affordable Care Act) has rather complicated language, it's understandable how such confusion has come to be.
Also, the chain e-mails often quote an op-ed piece in the Spokane (Wash.) Spokesman-Review by Paul Guppy, a policy analyst with the conservative Washington Policy Institute. Guppy stated that "middle-income people must pay the full tax even if they are 'rich' for only one day." That soon was rebutted by the local Realtors association and by the newspaper itself, which ran an article the next day correcting it, saying that only a very few home sellers would pay the 3.8 percent tax, according to the fact-finding organizations FactCheck.org and Snopes.com.
Still, the original claim in the Guppy piece lives on.
In reality, the 3.8 percent Medicare tax is a tax on investment income that will affect those known as "high-earner" – individuals with incomes over $200,000 a year or married couples who file jointly and earn $250,000 or more.
Although the law does say the tax falls on "net gain ... attributable to the disposition of property," which would include the sale of a home, it also says the tax would still be levied under the existing tax code, notes FactCheck.org, a nonpartisan fact-finding project of the Annenberg Public Policy Center of the University of Pennsylvania. And, according to that tax code, the first $250,000 of capital gains on the sale of a primary residence, or $500,000 for a married couple, is excluded from taxable income already. Vacation homes or rental properties are not excluded from the tax.
Here's how it would play out, according to Snopes.com, a well-respected nonpartisan website that confirms or debunks rumors and urban legends: If a couple with a combined income of over $250,000 wanted to scale back by selling their $2 million residence, and they made a $750,000 profit on the sale, they would have to pay an additional 3.8 percent tax on $250,000 (the $750,000 profit minus the $500,000 capital gains threshold), for a total "health care law tax" of $9,500 over and above the normal capital gains levy.
The national median existing-home price for all housing types was $170,700 in March, according to the National Association of Realtors. And because Internal Revenue Service figures show that less than 2 percent of all tax-paying households have incomes of $250,000 or more, most of us won't be subject to the 3.8 percent tax.
Copyright © 2010 The Florida Times-Union, Carole Fader. Jacksonville Distributed by McClatchy-Tribune Information Services.
If an opinion is not worth defending.. ...it's not worth having ........................Cat
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will section 1031 exchange avoid this new tax? It's crucial to put some kind of a limit on this tax besides income levels.
There really has to be some kind of protection made available to real estate investors otherwise this new tax will hinder even more transactions in a very slow real estate market that's bound to get slower with this new tax law.
Smaller investors will fall under the threshold and avoid this tax, but in the long term every real estate investors goal is to generate more than 200k of rental income which only subjects us to another tax...
Sigh. There are days when obeying the no politics rule just about requires me to handcuff myself out of reach of the computer
LOL - like poking a grizzly bear when you say that Cat... too bad I make too much to be considered a "Hard workin American". I guess I just sit on my ass all day and watch the numbers on my bank balance spin upwards until I decide to get up, walk to the window and pee on the heads of the little people.
OK Ok sorry, I stop.
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