The to-be-implemented 3.8% tax on “unearned Income” or net capital gains taxes from real estate transactions, associated with the Affordable Care Act (ACA), varies based on income, marital status and size of the gain, is expected to go into effect on January 1, 2013.
The 3.8% Affordable Care Act Investment Income Tax leaves in place the tax-free net gains exclusion on gains up to $250,000 if single, or $500,000 if married. Capital Gains beyond that are subject to existing taxes plus the additional 3.8%, for earners with an Adjusted Gross Income (AGI) of greater than $200,000 if single or $250,000 if married and filing jointly.
Here is one example of how the new tax could affect a seller; If a married couple that files jointly each earning $80,000 per year in AGI were to sell their family home for $850,000, pay Realtor fees of 4.75% (Thanks to Williams Realty’s friends and family rate), and pay 3% closing cost assistance to the buyer (a common request from buyers in this market) totaling $25,500, and pay-off the remaining debt on the property of $50,000, they would gain $734,125. Based on their income, as a married couple filing jointly, they have an AGI of $160,000, but after adding the gain from the sale, their AGI becomes $894,125. As a married couple they are eligible to take a capital gain of $500,000 tax-free from their home, leaving $234,125 that is subject to normal capital gains taxes plus the additional 3.8% ACA tax which in this circumstance comes to $8,896.75 in additional taxes paid in this transaction.
The Northern Virginia’s Spring market kicks off in February, if you’re planning to buy or sell give us a call so we can put you on a path to success. You can find us on the web at www.WilliamsRealty.us.