Affordable Care Act

I have had several people ask lately about the Affordable Care Act that is part of the new health care bill that goes into effect January 1, 2013.  The question is: Does the new law impose a 3.8 percent tax on profits from the sale of my home?

The answer is, no, with just a few exceptions. The new 3.8% tax will apply to the “unearned” income of “High Income” taxpayers. “Unearned” income is earnings from capital investments, such as capital gains, rental income, dividends and interest income.  The taxable portion of the unearned income that is subject to both income and the new Medicare tax is the amount of income gained from these sources, minus expenses associated with earning that income.  "High income" is considered as those with individual incomes over $200,000, or $250,000 for couples that file their taxes jointly. 

The sale must net a PROFIT of $250,000 in the sale of your PERSONAL residence, or the first $500,000 for married couples, in order to incur 3.8 percent tax.  Again, only those with Adjusted Gross Incomes (AGI) over $200,000 per year (or $250,000 for couples filing jointly) will be subject to the tax.   With these high figures, very few people will be affected. But don’t think that those with incomes over $200,000 ($250,000) are automatically taxed:  It still won’t apply unless the PROFITS from the sale of the PRIMARY RESIDENCE are $250,000 or more ($500,000 for married couples).  According to the Internal Revenue Service, in order to qualify for the $250,000 ($500,000) exclusion, you must be the owner of the home, and have lived in it as your primary residence for at least two years out of five years prior to the sale of the property. This exclusion does NOT apply to vacation homes or rental properties.  Using the September 2012 national median sales price of $183,900, as reported by the National Association of Realtors, you can see the vast majority of homeowners will not be affected, since the sale of a $183,900 home could not possibly generate a $250,000 profit.

If you have questions, or would like to discuss the sale of your property, I would be happy to help.  Please give me a call at 478-973-2684 or send me an email at: jpugh@goldenkeyrealty.net.