How 3.8% Tax Affects Homes for Sale in Encinitas

Real Estate Tips
3.8% tax, Encinitas Homes, encinitas realtor, encinitas realtors, homes for sale in encinitas
August 23, 2012

Many individuals and Encinitas Realtors are often confused by the 3.8% tax that will take effect in 2013. It is imperative that Encinitas Realtors and, in fact, all realtors know exactly how this tax will work so that they can explain it fully to their clients.

The 3.8% tax, as it has come to be referred to, was passed by Congress in 2010 and will be enacted starting January 1, 2013. This tax was passed in hopes of generating $210 billion for Medicare and health care overhauls.

The 3.8% tax is a bit complicated, but the National Association of Realtors has provided an informational brochure to provide some examples of how this scenario will pan out in different situations.

This tax will not be imposed on all real estate transactions, but rather on some income from capital gains (less capital losses), rents (less expenses), dividends, and interest. Only those filing an adjusted gross income of over $200,000 individually or $250,000 jointly will be affected.

Here’s an example of how this tax could play out, as provided by NAR, when applied to a sold home for sale in Encinitas that sold for a gain of $525,000 by a couple jointly fililng with an AGI of $325,000: