The New 3.8% Rental Tax Starting in 2013

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TAXThere is a new tax coming in 2013. Actually, there are several. Today, though, we’re talking about the 2010 Health Care Bill tax on passive income. You might have heard it also called the “real estate tax.”

The tax is on more than just real estate, but it’s not on the total gross income, as has been reported. Here are some quick facts on the new 2013 tax:

  • Tax begins 1/1/2013
  • Effective for individuals with AGI above $200K or married, filing joint taxpayers above $250K
  • 3.8% surtax, separate from other federal and state income taxes
  • Applies to interest, dividend, net rental income (less expenses), net capital gains (after capital loss deduction)
  • Applies to lesser of investment income or excess of AGI over threshold amount

New taxes and tax law changes often bring a lot of confusion in the beginning. This new tax is no exception. For example, at this point, we do not know whether a like-kind exchange (Section 1031) will save you from this tax.

Normally, as long as you roll over all of the proceeds and invest in another real estate property worth at least as much as the property you just sold, you can defer the taxes. But right now, we don’t know if that will mean that you also can defer the surtax.

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