Surtax starting in 2013 on property sales – get the facts first, starting with these

July 16, 2012 — Any you thought “Obamacare” was only about health care.

As political Washington loves to do, buried in the health care law that has been upheld by the Supreme Court, there is a provision that singles making more than $200,000 annually and couples making more than $250,000 annually face a new surtax of 3.8% on the certain types of investment income, including net rental income.

There’s a 3.8% surtax on income from rental property sales for some high-income taxpayers. CREDIT:

According to several reports my husband and I have read, if your income is solely “earned” from salary and other compensation from active participation in a business, you have nothing to lose from this new tax. Even if you have income above those thresholds, you might not be hit with the 3.8 percent tax, according to Kenneth R. Harney, who writes a weekly column about real estate matters for The Washington Post.

Individual circumstances can, of course, complicate matters. The surtax does not interfere with the current tax-free exclusion on the first $500,000 (for joint filers) or $250,000 (for single filers) or gain you make on the sale of your principal home. Those exclusions did not change. Any profits above those limits remain subject to federal capital gains taxation and, possibly, to the new surtax.

Read more from what is one of the quickest and (we believe) accurate assessments by Harney in this past Sunday’s editions of The Washington Post here.

As always, check with an accountant if you have any questions.

If you need a referral on a good accountant — as many of my clients have over the years — let me know. I’m glad to connect you with someone I trust.