Good. One small step to repealing the Idiot Chimp’s misbegotten 2001 tax cuts and returning to Clinton-era tax rates. Which, along with some defense cuts, would solve the budget-deficit problem virtually overnight.

[quote=spdrun]Good. One small step to repealing the Idiot Chimp’s misbegotten 2001 tax cuts and returning to Clinton-era tax rates. Which, along with some defense cuts, would solve the budget-deficit problem virtually overnight.[/quote]

Another +1

The 3.8% surcharge though isn’t just for real estate, it’s a general surcharge for all net investment income, including but not limited to interest, dividends, long/short term cap gains, annuity, and passive income from rental/royalties. (It excludes distributions from pensions and other retirement accounts not considered investment income…at least for now…)

And It applies to net investment income portion of your modified AGI if your modified AGI in excess of the threshold amount $200,000 for singles or $250,000 for joint. Not housing specific….

In the case of the primary home sales, the net gain exemptions still apply, and don’t count toward the tax surcharge.

…
So…When/if you sell your primary, you get the first $250k of gain ($500k gain for joint filers) tax free. And anything above $250k($500k joint) gain would be subject to that surcharge as any other investment if your AGI is above the threshold…

It’s really not that much different than if you unload a stock portfolio that nets you $250k in gains, except that in the case of the primary home, your first $250/500k is tax exempt.

Here, if this applies to you:
http://www.besskanecpa.com/Medicare-Surcharge.html

The other thing that will change

(a) Prop 30 increases if that applies to you
(b) capital gains tax rate has been increased from 15% -> 20% if your income is $400k or above for singles, $450k for joint if that applies to you….

Besides maybe trying to time your capital gains sales, nothing you can do about it. And that doesn’t always work. Case in point… A lot of people try “hold on to a high-flying stock/volatile” to “save on taxes until years where they AGI isn’t as high”… only to see the same volatile stock go from being a big capital gain to a big capital loss .

My philosophy is a paying $X extra tax dollars on net gain of asset Y is still better than paying $0 tax on an asset that you report as a capital loss (or worse as a capital loss carryover)

It’s the law and new tax rates. Deal with it. Besides, the markets have been on fire so, it wasn’t exactly that hard to have made money in the markets this year.

[quote=no_such_reality]Minor nit. That $250k isn’t on gains it’s on any income. So if you’re a two wage earner family with $250k of w2, every penny of capital gains gets the surcharge.[/quote]

Yes, the threshold $200k/$250k is on total modified AGI.

The 3.8% surcharge, however applies to investment income portion though, not on the “salaried/wage” income portion.

Also, if you’re 70 years old+ and taking mandatory distributions on your IRA, this looks like the last year QCD directly from your IRA in it’s current form withn allowed with it’s tax treatment, unless the government decides to extend that.

*Might* be helpful if you’re in the $400k+/year gain this year and subjecting yourself to a 20% capital gain tax instead of 15%. My understanding is with QCD, you can make a direct donation from your IRA and actually reduce your taxable income, since QCD distribution is not considered income. That might end up bumping you down to the 15% capital gains bracket, and your taxes might be slightly less if you happen to be on the borderline…

https://personal.vanguard.com/us/insights/article/qcd-comeback-012013

[quote=no_such_reality]Unfortunately that $450k threshold isn’t a problem yet although we’re still striving forward and hoping to have that problem in the future[/quote]

It only works if you’re retired and pulling money from your IRA’s/401k. I just happen to be in the loop because I know some old farts twice my age at work how were explaining things to me.

My understanding of what they are saying is
1) Let’s say you have your income 100% from long term capital gains of $451k. Your tax would be 20% on that or $90.2k

2) If you donated 2k via QCD, that would put your taxable income into 449k, with a 15% tax rate or $67.35k in taxes, plus $2k in charitable donations to your favorite cause.

I haven’t run it by an accountant to see if that’s correct or not, because it’s really not my problem, and my CPA tends to charge for every question I ask these days… Lol…And besides, that rule will be long gone by the time I retire.

But it does make me wonder. If someone is at/near the threshold. Let’s say they earned exatly $450k instead of $449k, their entire capital gains is taxed 5% more than if they earned an $1000 less…. If that’s the case, lol……Ouch…

[quote=jeff303][quote=flu]
But it does make me wonder. If someone is at/near the threshold. Let’s say they earned exatly $450k instead of $449k, their entire capital gains is taxed 5% more than if they earned an $1000 less…. If that’s the case, lol……Ouch…[/quote]

So you’re suggesting this higher rate may not be marginal? That would just make no sense at all, but I tried searching and couldn’t find anything to confirm or refute that notion.[/quote]

Both are marginal. Both affect the excess but the wording on the $450K one is pretty convoluted as the

[quote]20 (b) 20-PERCENT CAPITAL GAINS RATE FOR CERTAIN
21 HIGH INCOME INDIVIDUALS.—
22 (1) IN GENERAL.—Paragraph (1) of section
23 1(h) is amended by striking subparagraph (C), by
24 redesignating subparagraphs (D) and (E) as sub-13
MAT12564 S.L.C.
1 paragraphs (E) and (F) and by inserting after sub-
2 paragraph (B) the following new subparagraphs:
3 ‘‘(C) 15 percent of the lesser of—
4 ‘‘(i) so much of the adjusted net cap-
5 ital gain (or, if less, taxable income) as ex-
6 ceeds the amount on which a tax is deter-
7 mined under subparagraph (B), or
8 ‘‘(ii) the excess of—
9 ‘‘(I) the amount of taxable in-
10 come which would (without regard to
11 this paragraph) be taxed at a rate
12 below 39.6 percent, over
13 ‘‘(II) the sum of the amounts on
14 which a tax is determined under sub-
15 paragraphs (A) and (B),
16 ‘‘(D) 20 percent of the adjusted net capital
17 gain (or, if less, taxable income) in excess of the
18 sum of the amounts on which tax is determined
19 under subparagraphs (B) and (C),’’.[/quote]

Bump so the $400k/450k limits for the 20% cap gain tax rate IS incremental.

But it’s a pretty f..d up law.

Basically, it punishes wage earners that make that income in the majority in income, while it’s much for forgiving on people who are hitting those limits via capital gains…

For joint filers, if your AGI is $500k for example, it depends on where that income is coming from.

If $450k was from your W2/1099 and $50k was from capital gains, then what ends up happening is the entire $50k in capital gains gets taxed at 20%.

If, however, your W2/1099 income was $200k, and your capital gains was $300k, then $250k of your capital gains get’s taxed at 15% (up to the $450k threshold) and the remaining $50k of your capital gains gets taxed at 20%.

So who loses in this?

1) Doctors/lawyers who get most of their income as wages.

Who wins?

2) I’m guessing people who get their AGI mostly from investments…

Lol….

http://fffcpas.com/news/2013/02/04/how-do-i-compute-the-new-20-percent-net-capital-gain-rate-under-the-new-tax-law/