Minnesota Real Estate Investors Association, Inc.

Minnesota Real Estate Investors Association, Inc.

The New 3.8% Tax on Real Estate for Obama Care


TaxesBeginning on January 1, 2013, a new real estate capital gains tax will take effect to pay for Obama Care. When Obama Care was passed back on March 23, 2010, one of the funding measures was to take from Medicare.

“Bet you didn’t know that, did you?”

So how are they going to recover those costs for Medicare that they stole for Obama Care? Simply increase taxes on real estate and other interest and dividends. This new 3.8% tax is expected to raise $210 billion over the next 10 years.

The new 3.8% Tax Rate applies to:

  • Individuals with adjusted gross income (AGI) above $200,000
  • Couples filing a joint return with more than $250,000 AGI

Types of Income:

  • • Interest, dividends, rents (less expenses), capital gains (less capital losses)

The new tax applies to the LESSER of:

  • Investment income amount
  • Excess of AGI over the $200,000 or $250,000 amount
  AGI before Sale   $275,000
  Sales Price of Rehab   $150,000
  Basis   $120,000
  Gain   $30,000
  New AGI   $305,000
  3.8% Tax on Gain    
  ($30,000 x 3.8%)   $1,114

That’s an extra $1,114 you would owe the IRS just to pay for Obama Care, per property if your AGI is over $200k/$250k.

The National Association of Realtors has created a brochure (pdf) with a few examples that I found very helpful in understanding the different taxable events and how they affect us.


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