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Misinformation about the 3.8 percent Medicare tax continues to be circulated.
Here are the correct facts about the Medicare tax:
Beginning in 2013, the much-publicized and often misunderstood 3.8 percent Medicare tax on unearned-taxable income will go into effect. While the application of this tax will utilize a complex formula, what is important to remember is:
- It is applicable to households in the top two tax brackets (individuals with an income above $200,000 or $250,000 for married couples),
- Applicable only on taxable unearned income, such as capital gains, interest, dividends and rents,
- Capital gains exemption for principal residences ($250,000 for individuals and $500,000 for married couples) is not affected, and
- Real estate agents should have their clients contact their tax professional if they believe the new tax will impact them.
NAR (National Association of Realtors) has prepared a new guide, Top 10 Things You Should Know about the 3.8 percent Tax.