ERA Brokers Consolidated recently held a presentation for the Washington County Board of Realtors at the board office. They had Steve Radmall; who is a partner at the CPA firm Savage, Esplin & Radmall, PC. come and speak about taxes and where we are going from here.

In the Utah Realtor Magazine there was another great article that talks about the 3.8% tax. This tax is designed to pay for the Medicare Trust Fund. January 1st, 2013 the tax will go into effect. This tax will apply to investment income in limited situations, including some instance when an owner sells a home.

The article states that in reality, it is not a transfer tax and will only affect a small number of people, about 2 to 3 percent of the entire population, said Linda Goold, director of tax policy for the National Associations of Realtors.

Here are a few questions and answers from the article.

1. TRUE OR FALSE? The new Medicare tax is a tax on investment income.        

TRUE. Taxpayers may have to pay a 3.8 percent tax on some income from interest, dividends, rest   (less expensive) and capital gains (less capital losses). The new tax does not apply to other types of   income.

2. TRUE OR FALSE? The new tax applies to all income levels.

FALSE. The new tax only applies to households with adjusted gross income of more than $200,000 for individuals and $250,000 for couples. “When you add up all of your income from every possible source, and that total is less that $200,000 ($250,000 on a joint tax return), you will NOT be subject to this tax,” said a fact sheet from the National Associations of Realtors, “Top Ten Things You Need to Know About the 3.8% Tax”

3. TRUE OR FALSE? The tax only applies to income earned on the sale of real estate.

FALSE. The new tax applies to all types of investment income, not just real estate. For example, if a taxpayer sold stocks for a gain, he could be subject to the tax if his adjusted gross income exceeded the $200,000 threshold (or $250,000 for a joint return). The new tax would apply to the lower of the following: 1) the investment income amount or 2) the adjusted gross income in excess of the $200,000 or $250,000 limit.

4. TRUE OR FALSE? A taxpayer selling a principal residence is less likely to be subject to the tax.

TRUE. For principal residences, there is a capital gains exclusion of $250,000 for individuals and $500,000 for joint filers. That means a couple selling their residence would have to have a gain of more than $500,000 before they would qualify for the 3.8 percent investment income tax (assuming they met the tax’s income requirements).