The 3.8% Tax: How Will This Affecct The Sale of Your Miami Beach Condo?

Along with 2013 came a 3.8% tax but it is not really a Real Estate Tax. Now there is an additional Medicare tax included in the Affordable Care Act. There have been all kinds of rumors going around about this new tax.

I have had a lot of people asking how will this affect the sale of my Miami Beach condo? Well I hope this helps clear up some of the confusion.

I did some research to see how this would apply to people that are thinking about selling real estate.

I will try and share what I know and have read on the subject.

There are multiple ways that you may or may not have to pay the 3.8% tax.

If you are single and sell a property and earn more than $250,000 income on the sale of the property and your annual household income is more than $200,000 then you would have to pay the 3.8% tax on the amount over the $250,000.

Let’s say you are single and your annual income is over $200,000 and you sell your house that is your primary residence for $450,000. You bought the house for $100,000 and sold it for $450,000 you would see a net profit of $350,000. Because this is your primary residence you get a $250,000 exemption. That would make $100,000 that is taxable at the 3.8%. That would = $3800.00 in Medicare tax that you would owe on the sale of your house.

The same scenario above except this is not your primary residence then you would have to pay the 3.8% tax on the $350,000 since you would not qualify for the additional $250,000 exemption. That would make $350,000 that is taxable at the 3.8%. That would = $13300.00 in additional tax that you would owe on the sale of your house since it is not your primary residence.

If you are married then your annual income can be up to $250,000 before you have to pay the new tax. Also you are allowed $500,000 for a exemption on sale of your primary residence.

Let’s say you are maried and your annual income is over $250000 and you sell your house that is your primary residence for $700,000 You bought the house for $100,000 and sold it for $700,000 you would see a net profit of $600,000. Because this is your primary residence you get an additional $500,000 exemption. That would make $100,000 that is taxable at the 3.8%. That would = $3800.00 in additional tax that you would owe on the sale of your house.

The same scenario above except this is not your primary residence then you would have to pay the 3.8% tax on the $600,000 since you would not qualify for the additional $500,000 exemption. That would make $600,000 that is taxable at the 3.8%. That would = $ 22800.00 in additional Medicare tax that you would owe on the sale of your house since it is not your primary residence.

These scenarios do not take into account your other income and deductions, if you feel this is going to apply to you in the sale real estate. You need to consult with a professional that knows you financial status and who can give you advice on how to proceed.

This post is based on my opinion and what I have read. I am not a Lawyer or an Accountant. If you think this tax affects you then you should seek the opinion of a professional that knows the law and your financial status on this matter.

The following link contains a PDF file that will help explain the new law.
Congressional Health Care Caucus

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