Now that the administration’s healthcare bill has passed, things are kicking into gear. The Republicans are amping up their campaigns on reversal and repeal; the Democrats are working on setting the thing in stone, and homesellers are getting ready to “do their part,” (like it or not) by making a little less money on the sale of their properties.
While there are a number of things that a number of people take issue with in this bill, for now, we’re going to focus on real estate. It’s not a secret that I think this bill was a terrible idea, but for now, whether you loved it or hated it, you need to be aware of the direct impact that it is going to have on you as a real estate investor.
Obamacare places a 3.8 percent annual tax on investment income on individuals who make 200,000 dollars or more a year, and on couples that make 250,000 dollars or more a year. How does this impact you and your clients? That income includes the money you make on property when you sell it, even if it is your primary place of residence if it exceeds capital gains thresholds. This could have a particularly detrimental effect on real estate investors, who tend to deal in large sums, but may not do a lot of deals per year.
Please note: these thresholds have been reported at varying levels from 200,000 per individual to 250,000 per individual. Most government representatives are spending most of their time emphasizing that the taxes are aimed at “high earners” rather than “regular people” and are not spending a lot of time making declarative statements about what actually constitutes a “high earner.” We do not have firm numbers since so much contradictory information – even from government agencies – is currently out there as people on both sides sift through the bill to find out what is actually in it.
Thank you for reading the Bryan Ellis Real Estate Letter – your thoughts and comments are welcomed below!