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P.O. Box 20683     Roanoke, Virginia 24018     (540) 774-7400


Real Estate Tax?

First, it isn’t a real estate tax nor is it a sales tax, it is a Medicare surtax on unearned income and was part of the Obama Healthcare Legislation of 2010. Also this part of the legislation doesn’t take effect until tax years beginning after 2012, for most people that will be the 2013 tax year. So for most people if you sell your home before 2013 the Medicare surtax will not apply to you.

Here is the technical explanation - Individuals with modified AGI over $200,000 ($250,000 if MFJ; $125,000 if MFS) are subject to a 3.8% surtax (the Unearned Income Medicare Contribution) on their net investment income, up to the excess of Modified Adjusted Gross Income (MAGI) over the threshold amount. Net investment income includes interest, dividends, royalties, rents, gross income from a trade or business involving passive activities and net gain from disposition of property (other than most property held in a trade or business) reduced by deductions allocable to such income (IRC §1411). The tax also applies to estates and trusts. In this case, the tax is 3.8% of the lesser of (1) undistributed net investment income or (2) the excess of AGI over the dollar amount at which the highest estate and trust income tax bracket begins.

OK so what does all this mean? It means if you are a married couple filing a joint return and your modified AGI is not over $250,000 you don’t have to worry.

And, if your modified AGI is over $250,000 but the gain on the sale of your personal residence is $500,000 or less and you qualify for the sale of home exclusion you still don’t have to worry.

Tax laws are subject to change at any time. Please contact us for the latest information.

Please Note: This information is provided to you by Accounting and Tax Center, Inc., for use as general guidance, and is not rendering specific legal, tax, or accounting advice. Only a qualified tax professional with all the facts at his or her disposal can determine the appropriateness of the application of any law to a given set of facts.

NOTICE UNDER INTERNAL REVENUE SERVICE CIRCULAR 230: This communication is not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer by the Internal Revenue Service.

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If you are in the Roanoke area and need a tax preparer or someone to represent you before the IRS, we can help.

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