Short Sales 4U is happy to take the “I don’t know” out of one of the BIGGEST questions for next year… “What is going to happen to homeowner’s tax benefits that we have now, next year when they expire?”
2013 TAX REPROCUTIONS are important for all agents to know about.
It’s urgent information NEEDED FOR ALL HOMEOWNERS to understand nationally.
We don’t need to put the fear of God in people’s minds about still doing short sales next year. We do need to educate ourselves and your clients for next years sales.
When push comes to shove, the fiscal Cliff must be met by relief from the taxpayers of America.
Selling homes and the taxation of them is a major way for Congress to meet a need that has not been met for quite some time. Recovery needs to happen on both sides of the board. The taxpayers need relief and so does the Government.
Many homeowners are trying to close before the end of the year to take advantage of some major tax relief programs that are set to expire December 31st 2012 which is important because quite frankly, I don’t believe they will be there next year.
Real estate brokers who deal in high-end properties have been reporting an upsurge in listings. Some sellers are desperate to sell their homes before Jan. 1, 2013, when they could be subject to much higher tax rates on capital gains.
Are these sellers right to be worried?
The short answer is "yes," some sellers should be concerned about higher taxes on capital gains in 2013. If the Bush tax cuts are allowed to expire at the end of 2012, some taxpayers will see an increase of 8.8 percent on their taxes on long-term capital gains, including gains on home sales.
Currently, the maximum tax rate on long-term capital gains is 15 percent. If the Bush tax cuts expire, this will go up to 20 percent on Jan. 1, 2013.
Also on Jan. 1, the new Medicare tax enacted as part of Obamacare will take effect. This will impose a 3.8 percent tax on investment income of individuals earning more than $200,000 and couples earning more than $250,000. Together, these result in a 23.8 percent tax on long-term individual capital gains -- an increase of 8.8 percentage points compared with the current 15 percent rate.
However, while the 20 percent capital gains rate would apply to all long-term capital gains, the 3.8 percent Medicare tax will, at most, apply only to the amount a taxpayer's income exceeds the applicable income threshold ($200,000 or $250,000).
More importantly, homeowners will still be eligible for the $250,000/$500,000 exclusion on capital gains from home sales. This means that the 3.8 percent Medicare tax will affect relatively few homeowners. Nevertheless, it will be a hit on homeowners who have substantial equity and income.
For example, an individual with a $500,000 in income would have to pay the 3.8 percent tax on up to $300,000 of his investment income in 2013. If this individual owned a home with $750,000 in equity and qualified for the $250,000 exclusion, he would be left with $500,000 in investment income, $300,000 of which would be subject to the 3.8 percent tax -- an additional tax of $11,400.
If the Bush tax cuts expired, this person would also have to pay an additional 5 percent in capital gains tax on his home sale profit (20 percent instead of 15 percent), which would result in $25,000 in additional tax.
Altogether, this person would owe an additional $36,400 in taxes if he sold his home in 2013 instead of 2012.
Any person with substantial income and equity should perform this simple calculation to determine how much tax they could have to pay if they wait until 2013 to sell.
We can help investors still purchase homes and distressed homeowners still sell their homes. This tax change will not force our real estate market to cease to recover in this volatile economy, but it will effect some of our short term investors who were just trying to jump in and get right out of a good deal.
I can tell that this next year will be exciting and still very productive for everyone trying to help homeowners and investors alike understand really what Is happening with the changing real estate market today.
Its important for every real estate agent working today to understand not only how to sell your listings, but give sound real estate advise that can affect your homeowner directly good or bad.
Thank you and I wish you all the best real estate sales you have had in a long time in 2013!
Your friendly Short Sale expert!! At Short Seles4U- Stacie MacDonald
*some tax information was use from the Tim Inman website*