How Will the New 3.8% Investment Tax Affect Real Estate

First, understand that this tax WILL NOT be imposed on all real estate transactions, a common misconception. Rather, when the legislation becomes effective in 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses). The tax will fall only on individuals with an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI.

Also, please note that the new tax applies to the LESSER of:

  • Investment income amount
  • Excess of AGI over the $200,000 or $250,000 amount
  • As an example, let’s take the sale of a principal residence. John and Mary sold their principal residence and realized a gain of $525,000. They have $325,000 Adjusted Gross Income (before adding taxable gain).

    The tax applies as follows:

  • AGI Before Taxable Gain $325,000
  • Gain on Sale of Residence $525,000
  • Taxable Gain (Added to AGI) $25,000 ($525,000 – $500,000 home sale exemption)
  • New AGI $350,000 ($325,000 + $25,000 taxable gain)
  • Excess of AGI over $250,000 $100,000 ($350,000 – $250,000)
  • Lesser Amount (Taxable) $25,000 (Taxable gain)
  • Tax Due $950 ($25,000 x 0.038)
  • For a full analysis from the National Association of REALTORS®, click here: http://tinyurl.com/cj7hu53.

    November Market Statistics

    Sales of single-family, re-sale homes were up 5.6% year-over-year in November.

    Home inventory continues to be abysmal. It was off 73% from last November.

    The median price for homes jumped 23.4% year-over-year. The median price has been higher than the year before for the past ten months. The sales price to list price ratio has been over 100% for the past nine months.

    The average price for homes was up 19.2% year-over-year.

    Pending home sales were down 6.9% year-over-year.

    Sales momentum…


    for homes rose 0.8 of a point to +4.

    Pricing momentum…


    has been on the up-swing the past nine months. It rose 1.8 points to +9.2.

    Condo Statistics…

    The median price for condos was up 43.6% year-over-year. That’s nine straight months of double-digit gains.

    Sales were off 4.5%, while pending sales fell 10.5%.

    Condo inventory was down 83.1% from last November.

    This is an extraordinarily tough market for buyers. It’s important to be calm and realistic. If you don’t know what to do or where to begin, give me a call and let’s discuss your situation and your options.

    The Real Estate Report provides an automatic, easy to use, property analysis feature, a mini-CMA. You can access it in the Property Analysis tab. Input your address and get a list of properties around yours that have recently sold or are currently listed for sale, all on an easy to read map. http://kimconnor.rereport.com to see an example

    The Santa Clara Couny Real Estate Market Trends Report provides local market data on-line and in print.

    Our on-line report provides an interactive experience where your prospects and clients can look at market trends down to the neighborhood level.

    The four-page, condensed printable version of the report provides a brief summary of the local market and has county foreclosure stats. You can access it here: http://rereport.com/scc/print/Kim.ConnorSCC.pdf