Real Estate Blog

Homework time, friends. On January 1, 2013 a new 3.8 percent tax will take effect on some investment income including real estate transactions. It's going to be important for you to clearly understand this tax, which is -- shock of shocks - complicated, which is why advise you to have a pow-wow with you own tax advisor.

I don't know about you, but I'm the kind of person who does better with real life examples. The National Association of REALTORS has put together a terrific brochure that outlines some scenarios in which the new tax will come into play. The link to the material is at the bottom of this post, but there are a few general things you'll want to keep in mind as you read.

First, where did this thing come from? It was passed by Congress in 2010 to generate somewhere around $210 billion to fund the overhaul of health care and Medicare.

From the "git go," remember that the tax does not apply to all real estate transactions. It may impose a 3.8% tax on some -- but not all -- interest, dividends, rents (minus expenses) and capital gains (less capital losses.)

Additionally, it will only apply to individuals who have an adjusted gross income of more than $200,000 and couples with joint returns showing an AGI of $250,000.

With that foundation information, read the brochure -- or better yet -- read it, print it out, and file it away. There will likely be much more relevant reading material forthcoming in regard to this tax. If I were you, I'd start a folder, digital or otherwise, and keep the information together. Whenever the government is going to be in my pocket? I want to know how and why.

Again, I strongly encourage you to meet with your own tax professional to see if or how this will affect you.

Click here to read the brochure.