# If you own a home....read!!!



## Chuck Smith (Feb 22, 2005)

> If you own a home, Please read this.
> 
> THIS WILL BLOW YOU AWAY !!!!!
> 
> ...


I know I have brought this up before but this should be at everyone attention. This was snuck in to the bill on how to pay for it. Like I have stated over and over and over. This is also on top of any "cap gains" tax. So you could be getting taxed twice. The Obamacare bill will not fund itself and will need more and more goverment aid as the population ages in order to pay for itself. So now it is this tax to help fund it. When this doesn't fill the void of the money pit what will they tax next? Things to think about and ask our leaders in washington.


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## jacobsol80 (Aug 12, 2008)

Anyone who knows me will tell you I'm no fan of this administration. However, I don't think we help our cause by passing on information containing half truths. Below is the analysis of this section of the bill by a certified financial planner so there doesn't appear to be any political motivation involved. Please note that in the first example I added the underline and bold on the word "gain" to emphasize that the person made a profit of $275,000 on the home sale and not that the home sold for that amount.

The 3.8 percent tax is not a sales tax; it is a Medicare tax on investment income starting in 2013. It is a provision of the Patient Protection Affordable Care Act, health care legislation. Congress passed the legislation, and this new tax is seen as a way to help fund President Obama's health care and Medicare plans. The health care plan could be repealed or changed, but even if this happens, some experts expect a similar tax to take its place because of the budget deficit.

The 3.8 percent tax on investment income will apply only to those single taxpayers with modified adjusted gross incomes above $200,000, married taxpayers filing jointly with MAGI above $250,000, and taxpayers married filing separately with MAGI above $125,000. This is in addition to the new increase in the hospital insurance, commonly referred to as the Medicare payroll tax, for these same taxpayers. The hospital insurance tax is equal to 1.45 percent of covered wages with no wage cap. Beginning in 2013, an additional 0.9 percent will be added to any covered wages exceeding $250,000 for those married filing jointly, $200,000 for single filers, and $125,000 for those married filing separately.

For primary home sales, the entire exemption on capital gains remains intact for all taxpayers. As with all legislation, this could change, but right now the $250,000 capital gains exclusion for single taxpayers and the $500,000 for those married filing jointly remains and can be claimed every two years. The 3.8 percent Medicare tax is on the lesser of net investment income or MAGI that exceeds $200,000 if single, $250,000 married filing jointly and $125,000 married filing separately.

Examples:

Sue Single has MAGI of $250,000 and sells her primary residence for a *gain* of $275,000. Her taxable gain is $25,000 ($275,000 minus $250,000 exclusion) and is added to her MAGI to equal $275,000.

Excess MAGI over $200,000 equals $75,000.

Home sale excess taxable equals $25,000.

The 3.8 percent Medicare tax is applied to $25,000, so an additional $950 tax is owed.

Joe Single has MAGI of $175,000 and sells a second home for a gain of $100,000. His taxable gain is $100,000 since there is no exclusion on a second home. This amount is added to his MAGI to equal $275,000.

Excess MAGI over $200,000 equals $75,000.

Second home sale taxable equals $100,000.

The 3.8 percent Medicare tax is applied to $75,000, so an additional $2,850 tax is owed.

Read more here: http://www.newsobserver.com/2011/10/30/ ... rylink=cpy


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## Chuck Smith (Feb 22, 2005)

That is correct it is on the "gain" of your home. But people are already paying a "capital gains" real estate tax on that gain which can be taxed at 25%. Real estate has its own "capital gains" tax. Just like stocks, bonds, etc have their own tax. Why do you think their is a thing call 1031 tax exchanges out there. So people can roll these gains into another property so they don't have to pay the 25 % tax on it.

Your data or example are off.



> Sue Single has MAGI of $250,000 and sells her primary residence for a gain of $275,000. Her taxable gain is $25,000 ($275,000 minus $250,000 exclusion) and is added to her MAGI to equal $275,000.
> 
> Excess MAGI over $200,000 equals $75,000.
> 
> ...


That $25,000 will be taxed at 25% first for the "capital gains" tax. Then at 3.8%. So on that $25,000 gain on real estate you will pay $6250 then an additional $950. So just on that $25,000 you will pay in $7200 in taxes.

See you forgot the "capital gains" tax that is already out there which is 25%.



> Joe Single has MAGI of $175,000 and sells a second home for a gain of $100,000. His taxable gain is $100,000 since there is no exclusion on a second home. This amount is added to his MAGI to equal $275,000.
> 
> Excess MAGI over $200,000 equals $75,000.
> 
> ...


Now on this example it is even worse..... You forgot the 25% "capital gains" tax on real estate of $25,000 on that $100,000. Then add on the 3.8%. So the total tax owed on this would be $27,850.

In this example that is why "Joe" needed to live in this place for 2 years out of 5 so he would not get nailed for any of the $25,000.

So since this is a hunting website and many on here own land or would love to own land. I will break it down for you. You purchase land for $500 an acre. So you buy 200 acres. That is a purchase price of $100,000. Now the years go by and land increases in value. You sell it now for $1500 an acre. That is a sales price of $300,000. Your gain is $200,000. Now the goverment will want 25% for the real estate "capital gains" tax. That is $50,000 in taxes. Then add on the 3.8% which is an additional $7600. So you will pay in taxes $57,600. So I don't know about you but that is a pretty good salary you are paying it taxes! That is why people do the 1031 exchange. So what they do is take that $200,000 in gain and go purchase another piece of property.....lets say a lake home, home down south, more property, etc. So you won't have to pay that $50,000 in real estate "capital gains tax". But you will still owe the 3.8% funding tax.


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## drjongy (Oct 13, 2003)

jacobsol80 said:


> The 3.8 percent tax is not a sales tax; it is a Medicare tax on investment income starting in 2013.


A tax is a tax no matter what it's called. It's a new tax....enough said.


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## Ron Gilmore (Jan 7, 2003)

Yeah, I own land that I paid $300.00 an acre for, that is worth $2800.00 now! Almost 30% in taxes makes it hard to sell, lots and lots of farmers and ranchers are finding this out. There is a way around this, but it really is going to make it hard for people that need the land value to retire and pass it on to a family member. Lots of land will be going into trusts! But soon the Gov greed will remove that as well!


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## Chuck Smith (Feb 22, 2005)

Ron... The greed already has gotten here. You can't as easily pass on farms to the next generation of family....inheritance taxes!

Like I mentioned the only way to do it tax free on the "gain" is to do a 1031 tax exchange. But the next thing you roll it into better not make any money because then you are in the same boat. IE.....if you sell some land and roll it into a retirement home down in Florida or Arizona. That great deal you are getting on that home down south could rebound in price and you will be in the same boat......or your kids will when they try to sell it. But that is a different subject with how they want to hammer people on inheritance taxes.

Again saving for your families future so they don't have to worry about money.....is starting to go the way of the dodo bird.....the goverment doesn't want you to do that. Again different subject. But yet it was also tried to get rolled into this great health care bill....but the snubbed it.....for now.


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## jacobsol80 (Aug 12, 2008)

Chuck Smith said:


> That is correct it is on the "gain" of your home. But people are already paying a "capital gains" real estate tax on that gain which can be taxed at 25%. Real estate has its own "capital gains" tax. Just like stocks, bonds, etc have their own tax. Why do you think their is a thing call 1031 tax exchanges out there. So people can roll these gains into another property so they don't have to pay the 25 % tax on it.
> 
> Your data or example are off.
> 
> ...


First of all Chuck, those are not my numbers. 
Second, they are accurate for the topic you posted being the additional 3.8% tax paid on real estate transactions. 
The article you posted is only referring to the extra tax and says nothing regarding capital gains taxes.
So would you like to comment on the accuracy of this statement as it applies to the majority of taxpayers keeping in that the exclusion is $250,000 for a single taxpayer and $500,000 for a married couple?

"Did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That's $3,800 on a $100,000 home, etc. When did this happen? It's in the health care bill and goes into effect in 2013. "

Now that being said, heck yes we pay too much in taxes for the service we get in return. But like many people, I would be happy to pay a little more in taxes if the government didn't waste it and it would guarantee my grandchildren would be able to experience the same country I grew up in.


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## ShineRunner (Sep 11, 2002)

The capital gains tax is also going up in 2013!


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## Chuck Smith (Feb 22, 2005)

I stated you numbers were off! And an additional TAX is being implimented. So yes anyone owning a home needs to think about this.

Anyone who owns property needs to think about this.

You are correct with todays market people will be exempt because they won't be gaining $250,000 on a home transaction. But if you sell before the 5 year mark. You have to pay. The average time a person spends in their first home is 5 years. That number is also decreasing. So this is very important.

Also people are starting to get "deals" on distressed property making it more likely to make profits off of your home. So this is very, very, very accurate and should be a concern.

Like others have stated....a tax is a tax.

And when you put it into prospective like I did with also adding the capital gains taxes. You are getting taxed at almost 30%. I know when they wrote this into effect people just thought.... Oh I pay $3,800 on a $100,000 gain. That isn't that big of a deal....They didn't realize the other 30%.


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