I have seen some pretty outrageous claims about the Medicare tax of 3.8% on unearned taxable income. The most recent I have seen in several places is a warning that if you sold a home for $100,000 you would be stuck with a $3,800 tax. The statement always includes a note that the home to be sold is in Florida, why Florida versus any other state is a mystery.
Anyway I guess the volume of misinformation has reached such a proportion that the National Association of Realtors has put together a second handout with the facts about the tax. Here is some information from that hand out.
1. Only households in the top two tax brackets could be impacted. These would be households of individuals with an income above $200,000 or a married couple with a combined income of $250,000 or above.
3. The capital gains exemption for sale of your primary residence still applies. The first $250,000 for individuals or $500,000 for couples of profit from the sale of your primary residence is automatically exempt. Say you are an individual and you sell your home and make a profit of $175,000 on the sale, all of that profit is tax exempt.
4. You should consult with a tax professional to see if you will be impacted by the tax. Only a professional can take all of your income sources and compare them to the new law. Each household will be an individual case so you don’t assume because your neighbor or friend has to pay that you will.
If you would like to review either of the N.A.R. handouts, let me know and I can share them with you. The only way to make good decisions is with good information.