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Did you know that if you are upside down on your home and process a short sale, that the amount that the bank forgives is scheduled to become taxable in 2013?  That means that, for example, if the bank forgives say, $100,000 in order for you to sell you home, that $100,000 would be taxed at your tax rate.  For a person in the 25% tax bracket that means they would owe $25,000 to Uncle Sam.  If you are having trouble making your payments, I can think of no better reason to do a short sale in 2012.  Contact us today.  You do have options!

I’ve heard several people, agents and clients, mentioning that they’ve been hearing rumors that a new 3.8% tax on all real estate transactions is about to be instituted to pay for the health care overhaul recently passed by Congress. This whole healthcare bill has been a source of much confusion and uncertainty so I looked into it a bit and after a little research I found that, like much of what we’ve been hearing during this remarkably contentious period, there is some truth and fiction to this rumor regarding a tax on a home transfer. Like most things in this bill, the truth is a little complicated.

Real estate transactions are not going to be subject to a 3.8% tax to pay for health care – that’s the falsehood – the truth is a bit more complicated.

Truth: Investment income for folks making over $200,000 single or $250,000 joint annually will be subject to a 3.8% Medicare tax and that could, but doesn’t necessarily, include real estate investment income.

Truth: And this is closer to home for most of us – If you sell your primary residence the amount of your profit that exceeds the capital gains exemption ($250,000 single, $500,000 joint) would also be subject to the 3.8% Medicare tax.

So, if you’re married, you would have to sell your primary residence for at least $501,000 more than you paid for it to pay an additional $38 in taxes. And since most of our homes have dropped in value anywhere from 20% TO 60% depending upon the area, you are unlikely to have a gain over the $500,000 capital gains exemption for married folks.