3.8% National Health Care Tax Explained

What is all the hype about the new 3.8% National Health Care Real Estate Tax?

National Health Care 3.8% tax on real estate explainedIt is very confusing to understand all the new tax laws pertaining to Obama Care Health Care Tax on Real Estate effective Jan 2013.

As part of the funding for the National Health Care Act, certain real estate income is being taxed. It has been estimated only 3.5% of Californians will bear any extra costs related to their real-estate sales.

This tax WILL NOT be imposed on all real estate transactions which is a common misconception. It may impose a 3.8% tax on some income for interest, dividends, rents (less expenses) and capital gains (less capital losses).  The tax will be imposed on individuals with an adjusted income (AGI) above $200,000 and couples filling a joint return with more than $250,000 AGI.

HNational Health Care 3.8% tax on real estate explainedere is the basic formula. The new tax applies to the LESSER of:

  • Investment income amount

  • Excess of AGI over the $200,000 or $250,000 amount.

This is a complicated tax so it is a good idea to talk with a CPA if you believe you may owe tax or if you plan to sell a home or invest in any Real Estate.

The National Associations of Realtors developed a Brochure to better explain different scenarios to help you determine if you have any tax exposure.

 

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