In the KCM Blog Crew article from July 17, they’ve compiled simple explanations to help explain what a possible 3.8% tax which will be put on home sales beginning in 2013 might mean to you…
“Fact Check.org explains it this way:
The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.”
From what I see, the average American doesn’t seem to be affected by this formula. Three factors need to be in play: 1) This must be a personal residence. 2) Those with incomes over $200,000 a year or married couples with $250,000 in income, filing jointly will likely to be affected. 3) There must be over $250,000 in profit, or $500,000 for a married couple from the sale, for the formula to be applied. However, if you have investment property, or are selling a second home, read on.
“The following simple explanation comes from midiShaw:
The tax will affect those sellers of real property who will be otherwise taxed on capital gains under current tax laws. Under current laws, if you sell your primary residence and meet the ‘time ‘ criteria, you are exempt up to $250,000 or $500,000 (filing individually or jointly). Any amount realized OVER that amount is taxable under current tax schedules based on income. As such, this new tax will apparently be added to the current capital gains tax burden IF your income is over $200,000/$250,000 (filing individually or jointly). For those selling second homes and investment properties, the tax, once again, will be applied to the amount of gain realized….
We offer this just as an explanation. Remember, when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information. “
To read the entire article click here.