The 2013 Obamacare Tax for Real Estate

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I mentioned the 2013 Obamacare Surtax for real estate investors quickly this past Saturday and then gave a possible solution to legally avoiding the tax.

If you didn’t catch the webinar, you can get the recording at the website located at

At the close of the webinar, I received a request to better explain what the medicare surtax was.

Here is the answer.

As part of the 2010 Affordable Care Act, a new tax comes into effect 1/1/2013. Passive income from interest, dividends, capital gains and real estate profit will be subject to 3.8% additional tax if your income is above $200,000 (single) or $250,000 if married.

Are you subject to it? Perhaps:

(1) Do you make over $200K if single or $250K if married? If yes, continue. No, it doesn’t affect you.

(2) Do you have passive net income? If yes, continue. No, it doesn’t affect you.

The tax will be 3.8% on your passive income. Remember this is the net amount. So, if you have rental income, you’ll first be able to subtract your rental expenses to come to net income. The most likely place that this will be a problem is when you sell a property and have long-term capital gains. That will be subject to the passive income. A big sale can push your income in a year higher than normal, making you eligible for this tax.

Remember this is only if you have passive income. If you are a real estate dealer, buying and selling property, than your income and gains will not be subject to the tax. As we talked about on the webinar this past Saturday, this may be a solution!

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