Medicare Tax Scare is Just That

To get to the facts on this Medicare Tax on selling your home in 2013 we went to one of our local lawmakers, Congressman Brett Guthrie. He says the new health care law is so confusing no one really knows exactly what's in it yet.

"But the rules haven't been written and we haven't seen how it's gonna be interpreted," said Guthrie. "But as we've gone through it for the last couple of days I think that's exactly what I said. If your income is less than $250,000 as a couple, this won't apply to you."

And Guthrie points out this is a tax on unearned income, and cannot be added to your paycheck to push you over the $250,000 limit.

But what if your income as a couple is more than $250,000-a-year?

For instance, just to illustrate this point, say you bought your house ten years ago for $200,000, and you sell it in 2013 for $800,000.

Your profit is $600,000, but $500,000 of it is exempt from capital gains tax, so you would only pay the 3.8% Medicare Tax on $100,000.
That comes to $3,800.

John Huggins, president and CEO of Coldwell Banker Legacy Real Estate Group, says this tax on unearned income will not affect that many people.

"Bottom line, this is just basically a small tax on that upper 1% to fund the medicare bill. And it will not affect most homeowners throughout the country, and definitely will not affect those individuals and couples who are making less than $250,000 a year."

So the numbers to remember as the threshold for paying the Medicare Tax are: $200,000-a-year for individuals,
and $250,000-a-year for couples.

And both a U.S. Congressman and a real estate professional say those who do make more than that, would only pay the 3.8% tax if they make more than $500,000 profit from selling their home.

And both men say chances are good this law will see many changes by the year 2013, and the Medicare Tax on unearned income may not even exist by then.


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