NEW 3.8% MEDICARE TAX (#163)
"ASSESSING THE IMPACT OF REAL ESTATE INVESTORS" |
UNDERSTANDING THE NEW 3.8% TAX OF INVESTMENT INCOME
With potential tax increases looming on the horizon, the value of tax deferral mechanisms, such as Section 1031 exchanges, have never been greater. One example of a potential tax increase which appears likely to take effect is the new Medicare tax, which Congress passed as part of the Health Care and Education Affordability Reconciliation Act of 2010, and was recently upheld by the Supreme Court. The Medicare tax, which goes into effect on January 1, 2013, will impose a 3.8% tax on the net investment income of joint filers with adjusted gross income over $250,000, and single filers with adjusted gross income over $200,000.
The new Medicare tax applies to adjusted gross income (the figure on the bottom of the front page of IRS Form 1040), which includes interest, dividends, capital gains, wages, retirement income and income from partnerships and small businesses. It appears the tax will also apply to dividends, rents, royalties, interest (except municipal bond interest), short and long-term capital gains, the taxable portion of annuity payments, income from the sale of a principal residence above the $250,000/$500,000 exclusion, gain from the sale of an investment property or a second home, and passive income from real estate and investments in which the taxpayer does not materially participate.
The National Association of Realtors (NAR) has prepared a brochure that contains a summary of the impact of this new Medicare tax on real estate investors and includes examples of several different investor scenarios. Clickhere to access the NAR Booklet, The 3.8% Tax: Real Estate Scenarios & Examples.
OTHER POTENTIAL TAX INCREASES IN 2013
In addition to the new Medicare tax discussed above, the "Bush-era Tax Cuts," which went into effect in 2001, are scheduled to expire at the end of this year. If the Bush-era Tax Cuts are allowed to expire due to inaction by Congress, the Federal capital gain tax rate will increase to 20%, and the highest marginal tax rate for ordinary income will increase from 35% to 39.6%.
THE COMBINED EFFECT OF THE TAX INCREASES ON REAL ESTATE INVESTORS
Future tax rates remain uncertain. But taking into account the imposition of the new 3.8% Medicare tax, and the uncertainty regarding the Bush-era Tax Cuts, on January 1, 2013 taxpayers could face one of three scenarios:
THE TAX CODE TAKETH, THE TAX CODE DEFERRETH-
THE INCREASING VALUE OF 1031 EXCHANGES
Despite these potential tax increases, one aspect of the tax code provides real estate investors with a huge tax advantage. A Section 1031 exchange, part of the tax code since 1921, allows real estate property owners holding property for investment purposes to defer taxes that would otherwise be incurred upon the sale of investment property. Savvy investors use 1031 exchanges to redeploy their investment capital into better performing investment properties. An exchange provides a fantastic opportunity for investment property owners to defer capital gain taxes. Call the 1031 exchange experts on Pete Dijkstra's Team today at 480-812-9200 and visit www.anyazhome.com.
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Thursday, October 25, 2012
New 3.8% Medicare Tax!
Wednesday, October 24, 2012
Monday, October 22, 2012
It's More Than You Expect!
The web address for this property is:
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1325431
Location:
6687 N 79th PL, Scottsdale, AZ 85250
New or Resale:
Resale
Type:
Single Family Home
Price:
/ $294,500
Address:
6687 N 79th PL
City/St:
Scottsdale, AZ
Zip Code:
85250
Bedrooms:
3
Bathrooms:
2 full, 0 half, 0 three-quarter bath
Square Footage:
1437
MLS#
4828115
Pete Dijkstra & Team
RE/MAX Infinity
2450 S Arizona Ave. #1
Chandler, AZ 85286
Ph#: 480-812-9200
Fax: 480-760-2330
Thursday, October 18, 2012
Just 2 Years Old And Relocating!
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1327814
Waterfront Lot In Chandler!
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1326739
Need 4 To 6 Bedrooms? $242,900!
The web address for this property is:
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1159865
Location:
247 Queen Creek, Queen Creek, AZ 85140
New or Resale:
New
Type:
Single Family Home
Price:
UNBELIEVABLE! / $242,900
Address:
247 Queen Creek
City/St:
Queen Creek, AZ
Zip Code:
85140
Bedrooms:
4
Bathrooms:
2 full, 1 half, 0 three-quarter bath
Square Footage:
3293
MLS#
247
Pete Dijkstra & Team
RE/MAX Infinity
2450 S Arizona Ave. #1
Chandler, AZ 85286
Ph#: 480-812-9200
Fax: 480-760-2330
Brand New 3,082 SqFt For Only $238,900!
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Wednesday, October 17, 2012
2,351 SqFt and Community Pool! Just $191,500!
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1327666
LAST OF THE "RED HOT BARGAINS!"
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1327571
You'll Love The Home And Like The Price!
The web address for this property is:
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1327537
Location:
4592 E Gleneagle Dr, Chandler, AZ 85249
New or Resale:
Resale
Type:
Single Family Home
Price:
/ $269,950
Address:
4592 E Gleneagle Dr
City/St:
Chandler, AZ
Zip Code:
85249
Bedrooms:
5
Bathrooms:
3 full, 0 half, 0 three-quarter bath
Square Footage:
3100
MLS#
112
Pete Dijkstra & Team
RE/MAX Infinity
2450 S Arizona Ave. #1
Chandler, AZ 85286
Ph#: 480-812-9200
Fax: 480-760-2330
Tuesday, October 16, 2012
4 Car Garage & 5,580 SqFt $499,000!
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1326754
Tempe Basement Home in Alisanos!
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1326795
Monday, October 15, 2012
Gorgeous Ocotillo Home - Traditional Sale
http://www.AnyAzHome.com/MyHomeDtl.asp?lstPages=1&HomeID=1326793
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