New Medicare Tax Imposed on Real Estate Sales

ScottR · Chief Bottle Washer Joined: Feb 11, 2006 Posts: 332

Many of you have heard about the new Medicare Tax on investment income, including income from real estate. However, based upon several calls we have received at the WRA, confusion still exists about when the new tax goes into effect, who it applies to, and what types of real estate will be impacted. Here are the facts:

Beginning in 2013, a new 3.8% tax will be imposed on investment income of "high-income earners" -- single households with adjusted gross incomes (AGI) over $200,000 and married households above $250,000. The tax applies to the smaller of the household's net investment income or the excess of AGI over the thresholds. Capital gains are treated as investment income.
If a household's AGI exceeds the thresholds, the household will be required to pay the 3.8% tax on the following types of real estate:

* the gain from the sale of a primary residence, if the gain on the home exceeds $250,000 for single households or $500,000 for married households (Note -- For primary residences, the tax applies only to the gain over these amounts.)

* the gain from the sale of second homes

* the gain from the sale of investment and commercial real estate

* net rental income from investment properties

For more information on the new Medicare Tax, please visit:
http://www.realtor.org/small_business_health_coverage.nsf/pages/health_ref_faq_med_tax?opendocument