2013 Real Estate Sales and the New 3.8% Medicare Tax 
 
Numerous tax changes have occurred in the beginning of 2013 some of which affect taxpayers selling real estate. Several people have asked me about the new 3.8% Medicare tax and what to expect with the sale of their home or other real estate. The following is a brief summary of some of the new tax laws. 
 
Income Tax Rates
The tax bracket of 10%, 15%, 25%, 28%, 33% and 35% have been permanently extended; however, an additional tax bracket of 39.6% has been implemented to impact individuals with Adjusted Gross Income (AGI) over $400,000 and married couples filing jointly with AGI over $450,000.
 
Capital Gains/Dividends Tax Rates
The long-term capital gains rates have been permanently extended at 0% for taxpayers in the 15% tax bracket or lower; 15% for taxpayers in the 35% tax bracket or lower; and 20% for taxpayers in the 39.6% (AGI over $400,000/$450,000) tax bracket.  The long-term capital gains rates have also been permanently extended to apply to qualifying dividends.
 
3.8% Medicare Tax
This new tax, called the Net Investment Income Tax, on net investment income impacts individuals with AGI over $200,000 and married couples with AGI over $250,000. They must pay a 3.8% tax on income from investments, including the sale of a home. 
 
Net investment income subject to the Medicare Tax
Generally, “net investment income” that is subject to the 3.8% tax consists of interest, dividends, annuities, rents (less expenses), royalties, and net gains from real estate sales.  Read more on Net Investment Income Tax.
 
Sale of Primary Residence in 2013
With the sale of your primary residence, you may be able to exclude up to $250,000 of gain for individuals and up to $500,000 for couples filing jointly. The excluded gain will not be taxed the 3.8%.  Gain that exceeds the exclusion will be subject to the 3.8% tax.
 
Sale of Vacation Home in 2013
Gain on the sale of a vacation residence, land or investment real estate is subject to the 3.8% tax.
 
Don't Forget State Taxes
Taxpayers must also take into account the applicable state tax, if any.  When you sell property that is located in Wyoming, whether your primary residence, a vacation home or investment property, no tax will be paid to the state of Wyoming.  Wyoming is considered the tax-friendliest state in the nation.  Read more about  Wyoming’s tax benefits.
 
I am a 24-year real estate professional in Jackson Hole, Wyoming, NOT a tax professional.  This summary of tax information is from sources deemed reliable but not guaranteed and should NOT be relied upon. Consult with your professional tax advisor for definitive answers on all of these issues and what these provisions actually mean.
 
Give me a call 307-690-6906 if you are thinking about buying or selling Jackson Hole real estate in 2013.