The Affordable Care Act, also known as Obamacare, has a statute that affects certain real estate transactions. This statute has caused confusion even among real estate sales professionals and, subsequently, people who are thinking about selling their home have held off because they have the wrong information.
Starting on January 1, a 3.8% tax on the sale of investment property will go into effect (It also applies to some income from interest and dividends). This tax does not apply to the sale of your primary residence nor does it apply to the sale of all investment property.
The tax only applies to the capital gain on the sale of an investment property when an individual’s adjusted gross income is above $200,000 and if a couple’s adjusted gross income is more than $250,000.
There is a tax exclusion for the sale of your primary residence. Individuals are exempted from paying a tax on the first $250,000 capital gain and couples filing jointing are exempted up to $500,000. This will not change on January 1.
Every situation is different and tax law is complex, so it is important to consult with your tax professional.
The National Association of REALTORS® has published a brochure with various scenarios that may be helpful. Click here for a copy of that brochure.
If you are planning on buying or selling a home in the Pioneer Valley, make your first call to Michael Seward at 413-531-7129.