
The 3.8 tax will go into effect on January 1, 2013 and will be imposed ONLY on those taxpayers with more than $200,000 of Adjusted Gross Income (AGI) ($250,000 on a married couple’s 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 new tax does NOT eliminate the benefits of the capital gains exclusion on the sale of a primary residence of $250,000 for single taxpayers and $500,000 for married couples filing jointly. Thus, ONLYthat portion of a gain above those thresholds is included in AGI and could be subject to the tax.REALTORS® should familiarize themselves with the tax, but should not advise their clients about the application of the tax. The amount of tax will vary from individual to individual because the elements that comprise AGI differ from taxpayer to taxpayer.
Visit the links below for additional in-depth information, as well as examples of home sales to which the tax may apply.
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