If a client can add up all income from every possible source for the year and it equals less than $200,000 ($250,000 on a joint tax return), this tax does NOT apply.
Knoxville, TN (PRWEB) October 11, 2012
The Holloway Group, the leading Knoxville real estate team at Gables & Gates, Realtors is educating clients on the infamous 3.8% tax included in the Health Care Reform Act. Troy Stavros, Broker/Partner with the Holloway Group stated, "We felt the need to get the facts to our clients because of the extensive amount of misinformation floating around the web via websites and mass email. We want our clients to be informed so it can ease their minds and put to rest the rumors about the 3.8% tax."
Here is the information given to Holloway Group clients:
If the client can add up all income from every possible source for the year and it equals less than $200,000 ($250,000 on a joint tax return), the tax does NOT apply.
The client will never pay this 3.8% tax while purchasing a Knoxville home or other Knoxville investment property, as it will never be collected as a transfer tax on Knoxville real estate.
The client will never pay this tax at closing when selling a Knoxville home or investment property. Any profit gained over the exclusion threshold at settlement is just added to the client's gross income for the year.
If and when the client sells a primary residence, the client will still receive the full benefit of the gain exclusion on the sale of a Knoxville home. The gain exclusion equaling $250,000 (single tax return)/$500,000 (married filing joint tax return). Only if your capital gain (profit) on the sale is greater than these amounts will the client then include any gain above these amounts as income on a tax return. However, if the client's total income (including the gain above the exemption threshold) is less than the $200,000 (single)/$250,000 (joint) amount, the tax does not apply.
The tax is not only for Knoxville real estate gain, but it applies to other types of investment income as well. If a client's income exceeds the $200,000 (single)/$250,000 (joint) amount, then the tax will also be applied to capital gains, interest income, dividend income and rental income (after expenses).
No matter how much a client makes in other types of income, if there is no income from capital gains, rents, interest or dividends, the tax does not apply.
The equation that figures the amount of 3.8% tax due will always protect $200,000 ($250,000 on a joint return) of a client's income from the 3.8% tax. (i.e. If the client is single and has a total of $205,000 income, the 3.8% tax would never be enforced on more than $5,000).
Sometimes it is easier to understand a concept by hearing someone speak about it, instead of reading the facts. NAR has an informative video explanation of the 3.8% tax produced by the National Association of Realtors featuring their Director of Tax Policy. For additional information a link can be found here to a brochure on the 3.8% tax provided by NAR.
The Holloway Group at Gables & Gates, Realtors is committed to bringing the best possible experience to fruition for Knoxville home buyers and sellers. At the Holloway Group we don't believe average is good enough for our clients. At the forefront of the Holloway Group is experience. Our team was created to serve our clients even better with specialization and expertise. We know that individually we cannot be everything to everyone so we’ve come together as a group, bringing all of our different strengths, so you always work with the best. We pride ourselves on being ahead of the curve on technology and how it can serve our clients. When you are a client of the Holloway Group, you can expect to have our entire team of professionals working to fulfill your individual real estate goal.