{"id":643,"date":"2012-04-05T08:04:11","date_gmt":"2012-04-05T12:04:11","guid":{"rendered":"http:\/\/dankrell.com\/blog\/?p=643"},"modified":"2020-06-03T08:36:07","modified_gmt":"2020-06-03T12:36:07","slug":"medicare-tax-on-real-estate-transactions-and-other-unearned-income","status":"publish","type":"post","link":"https:\/\/dankrell.com\/blog\/2012\/04\/05\/medicare-tax-on-real-estate-transactions-and-other-unearned-income\/","title":{"rendered":"Medicare tax on real estate transactions"},"content":{"rendered":"

\"medicare<\/a>As pundits and commentators speculate about the Supreme Court\u2019s opinion on the Patient Protection and Affordable Care Act of 2010 (PPACA), the National Association of Realtors\u00ae (NAR) reminds us<\/a> that the 3.8% tax on unearned income imposed by PPACA is not <\/strong>a transfer tax. This is a tax collected on \u201cunearned income\u201d is to be applied to the Medicare Trust Fund (e.g. a medicare tax).<\/p>\n

Although the new tax is not a transfer tax, it could apply to your home sale. Unlike transfer taxes, which are collected by state and local governments when real property is transferred between individuals; the \u201cMedicare tax\u201d is not calculated on the sale price nor is not applied to the proceeds from every real estate transaction. Rather, the tax provision kicks in when specific thresholds are met.<\/p>\n

Incidentally, even though a real estate transaction may meet the threshold to be taxed under the new Medicare tax; it\u2019s not the only \u201cunearned income\u201d that may be taxed under this provision. According to the NAR \u201cMedicare tax faq\u201d, \u201cUnearned income is the income that an individual derives from investing his\/her capital. It includes capital gains, rents, dividends and interest income. It also comes from some investments in active businesses if the investor is not an active participant in the business. The portion of unearned income that is subject both to income tax and the new Medicare tax is the amount of income derived from these sources, reduced by any expenses associated with earning that income. (Hence the term \u201cnet\u201d investment income.)\u201d<\/p>\n

\"real<\/a>To clarify, Henry Paula explains the Medicare tax in his January 2011 article (Planning for affluent taxpayers under the 2010 healthcare reform. The CPA Journal, 81(1), 46-47); \u201cUnder the Patient Protection and Affordable Care Act (ACA) \u2026there is a new 3.8% tax imposed on the net investment income of certain individuals, estates, and trusts considered to be high earners.\u201d\u2026\u201cFor tax years beginning after Dec 31, 2012, a 3.8% tax, called the Unearned Income Medicare Contribution, will be imposed on the lesser of net investment income or an individual’s modified adjusted gross income in excess of: $250,000 if married filing jointly, $125,000 if married filing separately, or $200,000 if filing single.\u201d Mr. Paula summarizes, \u201cThe 3.8% tax will affect taxpayers with business activity income from activities that are passive for the particular taxpayer and generate net investment income that, when combined with other income, is in excess of the thresholds\u2026\u201d<\/p>\n

The NAR gives this example (from the Medicare tax faq), \u201cIf AGI for a single individual is $275,000, then the excess over $200,000 would be $75,000 ($275,000 minus $200,000). Assume that this individual\u2019s net investment income is $60,000. The new 3.8% tax applies to the smaller amount. In this example, $60,000 of net investment income is less than the $75,000 excess over the threshold. Thus, in this example, the 3.8% tax is applied to the $60,000\u2026 If this single individual had AGI [of] $275,000 and net investment income of $90,000, then the new tax would be imposed on the smaller amount: the $75,000 of excess over $200,000.\u201d<\/p>\n

Aside from the anticipation of the Supreme Court opinion, the new Medicare tax will begin in 2013. If you\u2019re planning a home sale, consult your CPA, financial planner, and any other tax specialist to determine if (and how) the new Medicare tax applies to your situation.<\/p>\n

Original located at https:\/\/dankrell.com\/blog\/2012\/04\/05\/medicare-tax-on-real-estate-transactions-and-other-unearned-income\/<\/p>\n

By Dan Krell<\/p>\n

More news and articles on \u201cthe Blog\u201d<\/a>
\nThis article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright \u00a9 2012 Dan Krell.<\/p>\n

<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

As pundits and commentators speculate about the Supreme Court\u2019s opinion on the Patient Protection and Affordable Care Act of 2010 (PPACA), the National Association of Realtors\u00ae (NAR) reminds us that the 3.8% tax on unearned income imposed by PPACA is not a transfer tax. This is a tax collected on \u201cunearned income\u201d is to be … <\/p>\n

Continue reading “Medicare tax on real estate transactions”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[123,382,288,533,13,331],"tags":[865,912,633,536,952,797,517,902],"class_list":["post-643","post","type-post","status-publish","format-standard","hentry","category-home-sale","category-home-seller","category-housing-market","category-ppaca","category-real-estate","category-transfer-tax","tag-home-sale","tag-home-seller","tag-home-selling","tag-medicare-tax","tag-ppaca","tag-real-estate","tag-selling-a-home","tag-transfer-tax"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p1VZLf-an","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/comments?post=643"}],"version-history":[{"count":6,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/643\/revisions"}],"predecessor-version":[{"id":5991,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/643\/revisions\/5991"}],"wp:attachment":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/media?parent=643"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/categories?post=643"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/tags?post=643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}