Real Estate Surtax If You Sell Your Columbia SC Home in 2013?

Real Estate Surtax Won’t Affect Many Columbia SC Home Sellers

When the U.S. Supreme Court upheld the health-care law in June, it rekindled an issue that had been relatively quiet for the past year: A 3.8 percent “real estate tax” on Columbia SC home sales beginning in 2013 that is said to be buried away in the legislation.

With major portions of the law scheduled to take effect less than six months from now, questions are being raised again: Is there really a 3.8 percent transfer tax on real estate coming in 2013? Does it preempt the existing capital gains exclusions for Columbia SC home sellers, as some have claimed?

Yes, upper-income individuals face a new 3.8 percent surtax that takes effect Jan. 1 on certain investment income, including some of their real estate transactions. But it’s not a transfer tax and it’s not likely to affect the vast majority of homeowners who sell their primary residences next year.

How The Surtax Could Affect You Selling Your Columbia SC Home Next Year:

The National Association of Realtors’ tax staff provides this example of how the 3.8 percent levy might affect you next year:

Say you and your spouse have adjustable gross income (AGI) of $325,000 and you sell your home at a $525,000 profit. Assuming you qualify, $500,000 of that gain is wiped off the slate for tax purposes. The $25,000 additional gain qualifies as net investment income under the health-care law, giving you a revised AGI of $350,000. Since the law imposes the 3.8 percent surtax on the lesser of either the amount that your revised AGI exceeds the $250,000 threshold for joint filers ($100,000 in this case) or the amount of your taxable gain ($25,000), you end up owing a surtax of $950 ($25,000 times .038).

The 3.8 percent levy can be confusing, and it can bite deeper when your taxable capital gains are far larger or you sell a vacation home or a piece of rental real estate, where all the profits could subject you to the investment surtax.

If you’re wondering if this “hidden surtax” could affect you and your individual tax situation if selling your Columbia SC home next year, definitely talk to a tax professional for advice.