Decoding the 3.8% investment income tax: a guide for La Jolla real estate owners

Vicki Johnson | La Jolla Real Estate

Discuss your real estate holdings with a professional advisor to determine your investment income tax rate.

By Vicki Johnson

As of January 1, 2013, some forms of investment income will be subject to a new 3.8% investment income tax. The exact parameters of this tax have sparked some confusion among La Jolla real estate owners and investors; and now the National Association of Realtors (NAR) has issued a brochure in response to clarify the matter. According to the NAR, the tax will not apply to all real estate transactions. However, it will be imposed upon some forms of income derived from rents, interest, dividends and capital gains.

The new investment income tax was put forward as a result of funding requirements that ensued after Congress failed to agree on tax law changes to pay for proposed adjustments to Medicare. As a result, the tax has been referred to as “the Medicare tax” since its projected $210 billion in proceeds is dedicated to the Medicare Trust Fund. Simply put, the 3.8% tax is, according to NAR, one imposed “on a portion of the money that you make on your money,” or what is sometimes referred to as unearned income.

In order to be affected by the new 3.8% investment income tax, individuals must have an adjusted gross income of at least $200,000 (or, if filing as a couple, a joint adjusted gross income over $250,000). For real estate owners who meet these criteria, the tax applies to the lesser of either the investment income amount or the excess adjust gross income.

The new tax may apply in the following scenarios:

  • Capital gains: sale of a principal residence, sale of a non-real estate asset, interests and dividends (securities)
  • Rental income: income sources including real estate investment income, real estate income as the sole source of earnings
  • Real estate sale: sale of a second home (non-rental), sale of inherited investment property
  • Purchase and sale of investment property

However, every case is different; and when the tax goes into effect in January, La Jolla real estate owners should get in touch with an experienced advisor to discuss their individual situations and plan accordingly for tax time.

To learn more about real estate investment taxes, get in touch with me, Vicki Johnson, today. Whether you are a new investor or a seasoned property owner, I have the local expertise to help you make a smooth transition into the New Year. Contact me via email at vicki@vrjrealestate.com, or visit me online: www.vrjrealestate.com.

Related posts:

  1. Luxury home sellers and buyers: find the best real estate agent for success in high-end markets
  2. Making housing affordable: how today’s market offers opportunity for potential buyers
  3. Rental market boost bodes well for housing market recovery
  4. To sell, or not to sell? An introductory guide to selling versus renting out your home in today’s real estate market
  5. Mitt Romney, La Jolla, and Election 2012: how the GOP candidate’s political progress might change local real estate and the surrounding community

Short URL: http://www.lajollalight.com/?p=91955

Posted by Social Media Staff on Jul 25, 2012. Filed under Columns, Sponsored Columns, Vicki Johnson. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Leave a Reply

La Jolla Community Calendar

Facebook

Bottom Buttons 1

Bottom Buttons 2

Bottom Buttons 3

Bottom Buttons 4

Bottom Buttons 5

Bottom Buttons 6

RSS North Coastal News

  • Local camp shapes Solana Beach youth into community leaders July 28, 2014
    After attending the inaugural La Colonia de Eden Gardens Youth Leadership Camp last year, Edgar Vergara was inspired to make positive change in Solana Beach’s Eden Gardens community. Along with other local teens, the 15-year-old co-founded the youth group La Colonia Changers and recently hosted a town hall forum on underage drinking. Passionate about making […]
  • Del Mar Union School District approves new contract for superintendent July 28, 2014
    The Del Mar Union School District Board July 23 approved the new contract for Superintendent Holly McClurg through June 30, 2018. Per the contract, McClurg’s annual salary will be $185,000 with an annual doctoral stipend of $10,000. She will receive a car allowance of $400 a month, 25 vacation days, health benefits and a retirement contribution of $700 a mon […]
  • Carmel Valley 5K and 10K to hit Gonzales Canyon trails in September July 28, 2014
    A new trail running race is coming to Carmel Valley this fall. Jeff Stoner of Del Mar’s Seasick Marketing visited the Carmel Valley Community Planning Board to update the board on the plans for the Carmel Valley Trail 5K and 10K Run, set to take place on Sept. 20. A portion of race proceeds will go toward the Challenged Athletes Foundation. […]