For several months, since ObamaCare was approved, there has been a lot of information spinning around online about the legislation, most of which is -at least - partially wrong. I got another such email from a friend today, so I wanted to let him and all the others who read my blog know the true information as I understand it concerning future taxation of earnings from the sale of a private residence - your home in Covington.
The email my friend was distributing said that as of January 1, 2013, if you sold your home, there would be a 3.8% tax on the amount you sold for to support Medicare. If you sold your home for $420,000, you would owe $15,960 in taxes on the sale. Partially true.... the date is correct, the 3.8% is correct... the rest is crap! (Of course not many of us would have to worry because by 2013, there won't be many homes around here worth $420,000!) But here's how the National Association of Realtors has determined that the new tax really works:
The new Medicare tax applies only to a gain you realize from the sale of your home that is more than the $250K / $500K existing primary home exclusion (known as the "taxable gain"), and only if you, as the seller, have an Adjusted Gross Income (AGI) above the $200K / $250K (single / married) AGI threshold.
For example, if you sell your home and make $30,000 on the sale, and your a married couple with an AGI (including the $30,000 taxable gain) of %180,000, the 3.8% tax would not even apply because your AGI is less than $250,000. However, if your AGI was $290,000, then the application of the 3.8% tax would be subject to a formula that specifies that you pay on the lesser of the capital gain or the difference between your AGI and the standard exclusion. Thus, the $30,000 capital gain on the sale is less than the $40,000 excess above $250,000 AGI, so the $30,000 gain would be subject to the 3.8% tax.
Of course all this is moot point if ObamaCare is repealed or goes unfunded. One can only hope.....
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