Now
that the Supreme Court has upheld the health care legislation, all of
its major provisions remain in effect, including the new tax that was
designed to affect upper income taxpayers. The 3.8% tax is imposed ONLY
on those with more than $200,000 of Adjusted Gross Income (AGI)
($250,000 on a joint return). The tax applies to investment income,
defined as interest, dividends, capital gains and net rents. These
items are all included in an individual's AGI. A formula will determine
what portion, if any, of these types of investment income would be
subject to the tax.The tax is NOT a transfer tax on real estate sales and similar transactions. Not long after the tax was enacted, erroneous and misleading documents went viral on the Internet and created a great deal of misunderstanding and made the tax into something far more draconian than the actual provisions.
The new tax does NOT eliminate the benefits of the $250,000/$500,000 exclusion on the sale of a principal residence. Thus, ONLY that portion of a gain above those thresholds is included in AGI and could be subject to the tax.
For your own situation, please consult a financial adviser or accountant.
