Obamacare imposes 3.8% Sales Tax on Home Sales

[Teufelhund]

Anyone seen this yet?
More taxes from the Obamacare bill. This one you'll have to pay if you sell your house after this year (I think it may apply only to high-income taxpayers; I don't know what that cutoff is).


Beginning January 1, 2013, ObamaCare imposes a 3.8% Medicare tax on unearned income of “high-income” taxpayers which could apply to proceeds from the sale of single family homes, townhouses, co-ops, condominiums, and even rental income, depending on your individual circumstances and any capital gains tax exclusions. Importantly, the “high income” thresholds are not indexed for inflation so will reach increasing numbers of middle-class taxpayers over time.Source: http://www.gop.gov/blog/10/04/08/obamacare-flatlines-obamacare-taxes-home

[aahorn]

who woulda thought they would have to actually pay for this mess?!

i bet this is the first of many new obamacare taxes

[Irving]

Super old news, but I would like to be reminded of the profit cut-off if anyone finds it.

I wonder if this can be side stepped by the 1031 tax exchange.

[Richard K]

Per our accountant you will pay 3.8% on that amount of gain over the original purchase price plus, unless you buy a more expensive house, you'll also pay capital gains taxes. Capital gains tax is currently at 15% but will go up to 30% in 2014.

[Rucker61]

Per our accountant you will pay 3.8% on that amount of gain over the original purchase price plus, unless you buy a more expensive house, you'll also pay capital gains taxes. Capital gains tax is currently at 15% but will go up to 30% in 2014.

Better get better information from that accountant.

http://www.irs.gov/publications/p523/ar02.html

"
Maximum Exclusion





You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true.

You meet the ownership test.
You meet the use test.
During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.


For details on gain allocated to periods of nonqualified use, see Nonqualified Use (http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000240774), later.
If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed.
You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons (http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200739).

Ownership and Use Tests





To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

Owned the home for at least 2 years (the ownership test), and
Lived in the home as your main home for at least 2 years (the use test).


Exception. If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. However, the maximum amount you may be able to exclude will be reduced. See Reduced Maximum Exclusion (http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200747), later.
Example 1—home owned and occupied for at least 2 years.
Mya bought and moved into her main home in September 2008. She sold the home at a gain on September 15, 2011. During the 5-year period ending on the date of sale (September 16, 2006 – September 15, 2011), she owned and lived in the home for more than 2 years. She meets the ownership and use tests.

Example 2—ownership test met but use test not met.
Ayden bought a home in 2006. After living in it for 6 months, he moved out. He never lived in the home again and sold it at a gain on June 28, 2011. He owned the home during the entire 5-year period ending on the date of sale (June 29, 2006 – June 28, 2011). However, he did not live in it for the required 2 years. He meets the ownership test but not the use test. He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200747) (explained later).


Period of Ownership and Use





The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they have to occur at the same time.
You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale.
Example.
Naomi bought and moved into a house in July 2007. She lived there for 13 months and then moved in with a friend. She moved back into her own house in 2010 and lived there for 12 months until she sold it in July 2011. Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. "

Anyone here at risk of making more than $500,000 on the sale of your house?

[BigDee]

So if I own a property for lets say 10 years and I lived in said property for the first 3 years of my 10 year ownership am I responsible for paying capital gains and the Obama tax?

I thought that so long as we owned and used the property for more than 2 years we would not have to capital gains tax when we sell it.

[Rucker61]

So if I own a property for lets say 10 years and I lived in said property for the first 3 years of my 10 year ownership am I responsible for paying capital gains and the Obama tax?

I thought that so long as we owned and used the property for more than 2 years we would not have to capital gains tax when we sell it.

I would confirm with a practicing accountant, as my degree is about 20 years out of date, but given the circumstances as stated, I'd say that this house does not qualify as your main residence. There are exceptions in the link I provided further down the page.

[Richard K]

Better get better information from that accountant.

http://www.irs.gov/publications/p523/ar02.html

"
Maximum Exclusion





You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true.

You meet the ownership test.
You meet the use test.
During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.


For details on gain allocated to periods of nonqualified use, see Nonqualified Use (http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000240774), later.
If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed.
You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons (http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200739).

Ownership and Use Tests





To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

Owned the home for at least 2 years (the ownership test), and
Lived in the home as your main home for at least 2 years (the use test).


Exception. If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. However, the maximum amount you may be able to exclude will be reduced. See Reduced Maximum Exclusion (http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200747), later.
Example 1—home owned and occupied for at least 2 years.
Mya bought and moved into her main home in September 2008. She sold the home at a gain on September 15, 2011. During the 5-year period ending on the date of sale (September 16, 2006 – September 15, 2011), she owned and lived in the home for more than 2 years. She meets the ownership and use tests.

Example 2—ownership test met but use test not met.
Ayden bought a home in 2006. After living in it for 6 months, he moved out. He never lived in the home again and sold it at a gain on June 28, 2011. He owned the home during the entire 5-year period ending on the date of sale (June 29, 2006 – June 28, 2011). However, he did not live in it for the required 2 years. He meets the ownership test but not the use test. He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200747) (explained later).


Period of Ownership and Use





The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they have to occur at the same time.
You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale.
Example.
Naomi bought and moved into a house in July 2007. She lived there for 13 months and then moved in with a friend. She moved back into her own house in 2010 and lived there for 12 months until she sold it in July 2011. Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. "

Anyone here at risk of making more than $500,000 on the sale of your house?

In our case we took the one time capital gains exemption when my wife sold her business so the 3.8% and the 15 or 30% would apply to any profit we'd make on the sale of our home. Our accountant is just fine thank you.

[Rucker61]

In our case we took the one time capital gains exemption when my wife sold her business so the 3.8% and the 15 or 30% would apply to any profit we'd make on the sale of our home. Our accountant is just fine thank you.

So your statement only applied to your situation, then. You may complain.

[Irving]

Buying a more expensive house is the 1031 tax exchange to which I was refering.

[sniper7]

wow, I really hope something is done so this gets reversed. 15% is already bad enough but to double it is asinine.

[rockhound]

Buying a more expensive house is the 1031 tax exchange to which I was refering.


this only applies to like kind exchange of an investment property,