|
 |
5/14/2010
A new 3.8% tax on home sales?
Lots of buzz about that in the blogosphere this morning. It brings home to roost one more dire impact of ObamaCare, but also begs for a few important details.
It just so happens I received an update yesterday from John Prophet, CPA and shareholder at Schenck SC. It’s very complicated stuff (well, to me at least), but let’s try to slog through just some of it.
Bottom line: A big new tax with tons of associated regulations and interpretations.
For tax years beginning after Dec. 31, 2012, a 3.8% tax will apply to net investment income of higher income taxpayers. The tax for individuals is 3.8% of net investment income that contributes to a modified AGI [MAGI] over $200,000 (single filers) and $250,000 (married taxpayers).
Prophet includes several calculation examples; here’s one.
For 2013, a single taxpayer has net investment income of $100,000 and MAGI of $220,000. He would pay the tax only on the $20,000 amount by which his MAGI exceeds his threshold amount of $200,000, because that is less than his net investment income of $100,000. Thus, the tax would be $760 ($20,000 × 3.8%)
Net taxable income includes all sorts of stuff. Interest, dividends, annuities income, royalties, rents and other passive K-1 income. The tax would apply on the sale of your residence only when you have a huge gain.
[G]ain from the sale of a principal residence … is excluded…. However, to the extent that gain from a sale of a principal residence … exceeds the $250,000/$500,000 [single/joint filers] limit …, it would be subject to the 3.8% tax. Gain from the sale of a vacation home or other secondary residence also would be subject to the tax.
So if you’re planning to sell a vacation home, try to do it before December 31, 2012!
Retirement savings may also be impacted.
The 3.8% Medicare tax makes Roth IRAs look like a more attractive alternative for higher income individuals. [But from there it gets complicated…] Qualified distributions from Roth IRAs are tax-free and thus won't be included in MAGI (or be subject to the Medicare tax), whereas distributions from regular IRAs (except to the extent of after-tax contributions) will be included in MAGI (but won't be subject to the Medicare tax).
Taxpayers thinking of rolling over regular IRAs to Roth IRAs should do so before 2013 to avoid winding up with higher MAGI as a result of the rollover.
Certainly dampens any effort to strive for those big bucks.
Jo Egelhoff, FoxPolitics.net
COMMENTS
Certainly dampens any effort to strive for those big bucks.
Maybe one could strive for the benefit of the common good instead.
Dean Weichmann (Fri May 14 09:20:45 2010)
Dean,
Maybe - but likely not.
Tax rules define behavior and penalizing home ownership is likely to have a detrimental affect on construction and design of new homes ... not to mention a continuing decline in municipal / state real estate tax revenue.
Being taxed STOPS people from doing what you want to tax.
So how's THAT going to work for "the greater good"? Ask any carpenter or mason how they like the prospects. How much they're giving to charity, how they are able to pay for their kids education or how much is being saved for retirement?
Yeah - taxing the hell out of a few really benefits the masses.
Jeff Riedl (Fri May 14 10:06:45 2010)
Wow! Really buying into that spreading the wealth thing, are we?
You just tell me how many poor people have given us good paying jobs.
There have been so many socialist societies that have crashed and burned (one occurring right now in Greece)we'll just have to trudge down that same old road and see if the end result would be different. Wait. Haven't I heard someplace that repeating the same action over and over and expecting a different result is a sign of insanity?
C. R. Stevenson (Fri May 14 10:25:14 2010)
Well Jeff, it seems to me that taxing the few (rich) to benefit the masses (the rest of us) is much better than taxing the masses to benefit the few.
This whole trickle down theory seems to have an inordinate staying power despite it's obvious failure.
People are much happier when equality is higher. We should be striving to reduce inequality rather than deluding ourselves that it is a good thing
Dean Weichmann (Fri May 14 10:25:42 2010)
"You just tell me how many poor people have given us good paying jobs."
How many rich people actually pick up my trash?
Dean Weichmann (Fri May 14 10:31:29 2010)
Come on Jo, Why the headline here? It's clear from the detail in your blog that this"tax on homes" is nothing of the sort yet most of the other posters obviously didn't read the detail and react as if their own primary residence will somehow have some tax on it. I suggest this blog should have been titled "net investment income tax increase on DAGI above $200,000". Much less exciting of course but a lot more accurate.
dave allen (Fri May 14 12:01:02 2010)
Damn it. Why did I know this would degenerate immediately into class envy. Dang it. People striving to make money is most often for the common good. Who do you think hires the vast majority of workers? Who takes the risk with capital to create new businesses and expand ongoing ones? Who will do it if they are taxes and regulated out of existence? Who?
Maddening.
Jo (Fri May 14 12:17:05 2010)
How many "rich people" pay the taxes that supports the governments that pick up garbage and build interstate highways and provide for the health care of low income and elderly Americans?
Jo (Fri May 14 12:50:15 2010)
I don't consider it to be class envy to expect those with wealth to pay more taxes. You are complaining about the taxes people will pay on their second house, get real.
Dean Weichmann (Fri May 14 17:03:19 2010)
Why dance around the issue, until rid of this cancerous growth on our economy, radiation and chemo, simply chip away at the edges of this insidious infection. It must be cut from the body, and the toll it takes will be difficult to withstand. When it comes to such invasive contagion, the cure can many times kill the host. God help us.
Richard Parins (Fri May 14 22:31:49 2010)
With the massive inflation that WILL occur due to excessive printing of fiat money, $250 to 500K will affect MANY more people than you suppose! I keep thinking of the Weimar republic...
emily matthews (Sat May 15 06:57:19 2010)
Why do you fear inflation so much? At this point inflation would be good.
Unfortunately, deflation is more likely.
Krugman;
"Ever since the economic crisis began there have been two schools of thought about inflation prospects. One school basically has a Phillips curve, aggregate demand view: because major economies are operating far below full employment, we should expect disinflation, and possibly deflation. The other is basically monetarist with a touch of Austrianism: look at all the money central banks are printing and governments are borrowing, it says, inflation — maybe even hyperinflation — is just around the corner.
Guess who’s been right so far?
“Spain joins therefore Slovenia, Portugal and Ireland in the number of countries where core prices are falling compared to the previous year,” said Luigi Speranza, an economist at BNP Paribas.
What about the US? Well, various measures of core inflation — like the Dallas Fed trimmed-mean deflator, the Cleveland Fed median CPI, and indexes excluding food and energy have all fallen from 2.5-3 percent inflation at the start of the crisis to around 1 or lower. If the trend continues — which it will unless the recovery is stronger than I fear — deflation is in our future, maybe next year."
Dean Weichmann (Sat May 15 08:25:14 2010)
|
|
Blog Archives
| 2010 |
  December
|
November
|
October
|
September
|
August
|
July
|
June
|
May
|
April
|
March
|
February
|
January
• Solberg: Healing After an Abortion
• Basketball fans eyeing extension of Miller Park sales tax
• Nanny sex-ed bill goes to Doyle
• A first. Village limits pension contribution for employees
• Nanny State update: Toothbrushing mandated
• Obama pushes education inflation
• WI Investment Board votes to borrow to juice up returns
• So Republicans have brought nothing to the table?
• You have got to be kidding me
• Nygren: Governor Continues Terms of Failure in State of the State
• Sen. Fitzgerald: Governor down the wrong track at high speed
• Phosphorus is the new CO2. $Billions in Wisconsin
• More Obama giveaways
• A reprimand? Would you keep him on the job?
• Burri: Sarah Palin for Prez troubles me
• Quote of the Day – Obama after the pie-eating contest
• Populism, abused and trampled
• Fitzgerald: Senate Republicans Propose Real Job Creation Agenda
• Stripped down health insurance – it’s about time
• Ok GOP, scrap the Party of NO; time to lead
• No way Feingold is a Coakley. Is Wall a Brown?
• Burri: Conservatives off the chart for a RINO?
• Paltry quid pro quo?
• Doyle says ARRA has ‘created or retained’ 44,000 WI jobs
• Does most of the public fall for this stuff?
• When you get signatures, always get a couple extra
• Blame it on the outmoded computers
• Scott Brown victory does not scuttle health bill
• 8th Congressional Candidate Forum, Jan. 25
• Scott Walker Meet-and-greet, Monday, Jan. 18
• Aren’t consumers taxpayers too?
• MORE taxes on investment income - dreadful and wrong
• Join the blaze orange army and say ‘Enough is Enough’
• The future of government-run health care
• Tax on banks is a really bad idea
• Roth, Savard on the stump, grassroots style
• Savard speaking in Appleton, 8 PM, Wed., Jan. 13.
• Rahmlow: Savard, Bies frontrunners for State Senate
• Burri: Failing Political Correctness 101
• School contracts and Race to the Top
• Senator Feingold worrisome and big red flags
• Psephological?
• This is really important. Contact Rep. Kagen. Now. Please.
• This is exactly what we need from Governor Doyle
• This guy is my hero
• Why am I not surprised?
• Talk health reform with Feingold (Th), Petri (today)
• Give the Mayor power over MPS - if he can break contracts
• Burri: Yup, Dems really are going to bypass a conference
• The $2.7 billion Wisconsin deficit no one told you about
• Walker launches county accountability website
• Rahmlow: Why is Van Hollen dodging the Nebraska deal?
|
| 2009 |
December
|
November
|
October
• The Lawton-Bader files
• Yup, it’s the TAX LEVY, not the tax RATE
• Ellis: costly automobile insurance laws must be rolled back
• If not Barrett, who?
• The subsidy game
• Burri: Bailouts, Banks, Health Care, and the Mob
• Attend Appleton Schools budget meeting tonight
• A public option WON’T increase costs? That’s delusional!
• Appleton Schools budget meeting Monday
• Wisconsin should be screaming for accountability
• Burri: If anything, we need more obstructionism around here
• WI on the leading edge - in the wrong direction
• Rep. Montgomery: Utility Customers Join State’s Crime-Fighting Efforts
• Public Conservation and Recreation Lands Total 16.5% of State
• In the crow's nest of the Titanic, shouting 'Iceberg!'
• Is Rep. Nelson a political hack?
• Health care: The road ahead will be brutal
• Kagen's pandering again
• Birthers - good stuff for you
• How much do we bend over backward for seniors?
• The trouble with health care is paying for it
• Two-parent families: The Gold Standard
• Burri: Kids... the joys and blessings
• Very, very worried about health care
• Rep. Huebsch: Wisconsin is proof government health care isn’t the answer
• School district contracts push up tax levy
• What? Obama, the Peace Prize?
• TODAY - hearing on Campaign Finance Reform
• Appleton School District tax levy up way too much
• CBO report is out - and the bill isn't even written yet?
• So, how much do YOU budget for health care?
• Burri: Copenhagen trip was amateurish
• “Sotomayor, you have blood on your hands...”
• Cap and Trade. Always follow the money
• Rep. Kagen gets (almost) free health services
• I actually agree with Rep. Kagen
• Future Wisconsin Conference for Conservatives, October 10, Wauwatosa
|
September
|
August
|
July
|
June
|
May
|
April
|
March
|
February
|
January
|
| 2008 |
December
|
November
|
October
|
September
|
August
|
July
|
June
|
May
|
April
|
March
• Important votes Tuesday, including Appleton Common Council
• Democrats are becoming supply siders??
• Further debunking Hillary myths
• WEAC has created an unsustainable monopoly
• From Mark Gundrum: One of the greatest honors an American can experience
• 'Operation Chaos' working?
• Joe Martin the best candidate in Appleton's 8th
• State programs to cut? - Volume II
• Oh the naivete of youth
• Not just disingenuous - flat wrong
• Steve - you will be missed
• Make cuts only AFTER you're elected....
• Getting serious: What programs can we cut?
• Rep. Steve Kagen joining me on Jerry Bader Show today
• Rep. Van Roy: Dental Care Pilot Program
• Has Dave Obey turned the corner on earmarks?
• Speaker Huebsch: Governor turns down Federal Aid?
• Mark Rahmlow: "We're Broke."
• As taxpayers, how do we know if it's a Chevy or a Lexus?
• This is trash talk - about a veteran
• Frank Lasee: Take time to get the Compact right
• 'The Gableman Ad' - is it racist?
• Roth thankful, Kagen shaking money tree
• Gov. Doyle's office not enamored with Freedom of Information
• Governor Doyle will never do it
• Leadership on smoking ban? Not Hanna
• Rep. Van Roy speaks out about smear ads
• You're threatening me about potholes?
• Losing the Hastert seat is NOT a trend and NOT curtians for the GOP
• First suggestion for 'slashing' programs
• Big money-saver for municipalities
• More one time fixes. Nuts.
• Any chances???
• I'm doing the Jerry Bader Show, today, the 11th
• Representative Frank Lasee: Final Waltz of the Season
• Guest Blog: It's not the county's business to be in the nursing home business
• Yup, Hillary won Texas and Ohio
• Gableman/Butler race featured - and it isn't pretty
• Lies from Planned Parenthood and NARAL
• He who sacrifices liberty.....
• Duh.
• The Troha sentencing, Doyle and that $200K
• Guns, passion and "originality"
• How hard is it anyway, to shut down a government program?
• Voting is a PRIVILEGE. And so are property taxes....
• Guest Blog: Governor Doyle, cancel your Ireland trip
|
February
|
January
|
| 2007 |
December
|
November
|
October
|
September
|
August
|
July
|
June
|
May
|
April
|
March
|
February
|
January
• Lots of ideas. No money.
• The Cigarette Tax - "Poor Policy Instrument?"
• School budget Lite?
• Frankenstein - not in the library, but in the legislature
• A librarian, a legislator, a president
• $1.25/pack - NO, NO, NO, and NO
• Kagen and Reagan in the same breath?
• Menasha: behind the 8-ball, but not biting the dust
• Any way you slice it, Wisconsin government wants (further) in on health care
• The World is Flat...what about health care?
• The PAC - too precious to fail. Day 3
• News follow-ups: Appleton West, Kagen at the White House
• Fox Cities PAC - too precious to fail - Day 2
• Fox Cities PAC - too precious to fail
• New Transit Tax coming your way
• Rep. Petri has his finger in the dike - I guess
• AASD Retirement Costs Burdensome
• Health care, health care, health care, health care
• Water rate increase was no slam dunk
• Education for all is just a bad dream
• New Year's resolutions from a parade snob
|
| 2006 |
December
|
November
|
October
|
September
|
| 2000 |
May
|
|
