Capital gains 2013 tax changes

Posted: July 19th, 2012 by Brad

New tax takes effect in January
As the Supreme Court recently upheld the Affordable Care Act, it’s important to understand the details of the Act’s new taxes as they affect real estate and real estate derived incomes.

Starting January 1, 2013, there will be an additional 3.8 percent tax on investment income and capital gains for those individuals who make more than $200,000 of Adjusted Gross Income (AGI) or $250,000 AGI on a joint return. The new tax applies to investment income, defined as interest, dividends, capital gains and net rents. These items are all included in an individual’s AGI. A formula will determine what portion, if any, of these types of investment income would be subject to the tax.

Here are some additional facts based on misinformation that has gone viral:

The tax is NOT a transfer tax on real estate sales and similar transactions.Not long after the tax was enacted, erroneous and misleading documents went viral on the Internet and created a great deal of misunderstanding and made the tax into something far more draconian than the actual provisions.

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 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. For more information on the upcoming capital gains tax change implications, please consult with an attorney or CPA.

For more info., the Seattle Times recently published a deeper article on this subject: http://seattletimes.nwsource.com/html/realestate/2018652719_harney15.html.

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