Gainesville Fl Home

What is The Deal?

The Health Care Bill recently signed into law by President Obama had a little known provision that levies a 3.8% Medicare tax on the proceeds from the sale of your home. Now the question is “Does this affect the proceeds from the sale of my home in Gainesville, FL. The answer is maybe yes, maybe no but yet possibly. Sounds like an answer from a government worker. But this is true. Like many provisions in the Health Care Bill, as more details become available more analysis is required to really know how this new 3.8% Medicare tax applies to a Gainesville Fl Home being sold.

How to Know if You’re Hit by the Taxman

Well the bottom line is that the new 3.8% Medicare tax on a Gainesville Fl home sale takes effect in 2013. So you have a few years not to worry. But when it does occur it does not apply to all homes being sold. First, it presently only applies to income earners who have adjusted gross incomes in excess of $250,000 for married filing joint or $200,000 for individuals. That could have quite a few people escape right there. Next, the current capital gains on home sales still provides for you to exclude gain of $500,000 if married filing joint or $250,000 if filing as an individual. Now if you can get through these two hurdles then the Health Care Bill provides that the 3.8% tax is imposed on your “net investment income”. This is easy right? The good news is that many people will be excluded from this new tax based on income and excess home gain on the sale.

Explain A Little More Please

First, a review of the sale of main residence rules:

1.     It must be your main home which is the one you owned and lived in most of the time for at least 2 years out of the prior 5 years.

2.     If you have a gain from the sale of your main home you can exclude certain amounts of the gain as discussed in the above paragraph. Keyword here is gain not home sale proceeds. Gain is the difference between the sale proceeds with allowed adjustments less the adjusted basis of the home you sold. You can refer to IRS Publication 523 to compute the adjusted basis of the home you sold. However, if you still have a taxable gain after you calculate the adjusted home sale proceeds minus the adjusted basis of the home minus the allowable exclusion, first congratulations, then this remaining gain could be subject to the new 3.8% Medicare tax.

But even then this new Medicare Tax on the home gain refers to including the residence gain in a household’s “net investment income”.

Thus One More Explanation Is Necessary

So there might be a little more reduction on this home gain tax? Well again yes or no but possibly. But to save our sanity and for this discussion, let’s just look at what is “net investment income” and leave it there for now. The real worry can kick start in 2013.

“Net investment income” as reported on IRS Form 4952 shows that your gross income from property held for investment can be reduced by investment expenses and the result is net investment income. The point is that the home gain that is lumped in with other gain on investments might be adjusted for certain expenses and the difference or net will then be subject to the new 3.8% Medicare tax.  Just be aware that there is a new tax on home sales possibly looking for you.

Article brought to you by Gainesville Florida Realty!