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.
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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.
(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.
