National Association of Realtors FAQ on Health Care Reform

Hi there,
Been a while since I blogged here, but that's what cancer and chemo will do!
So, anywho I'll get back on ntrack here because even ifg I am a cancer patient I am still, and need to be an active and working Realtor.
There have been a lot of rumors misunderstandings about Health Care reform and how it's getting funded, so if'n you're confused or curious, maybe this will help...

This is from an E-Newsletter I get as a member of the National Association of
Realtors...

NAR Frequently Asked Questions
Health Insurance Reform
National Association of REALTORS® Government Affairs Division
500 New Jersey Avenue, NW, Washington DC, 20001
REALTOR® is a registered collective membership mark which may be used only by real estate
professionals who are members of the NATIONAL ASSOCIATION OF REALTORS®
and subscribe to its strict Code of Ethics
NEW MEDICARE TAX ON “UNEARNED” NET INVESTMENT INCOME
Q: Who will be subject to the new taxes imposed in the health legislation?
A: A new 3.8% tax will apply to the “unearned” income of “High Income” taxpayers. Another 0.9% tax will apply to the “earned” income of many of these same individuals. Both levies are referred to as “Medicare” taxes. (For a description of the new 0.9% tax, see separate Q&A entitled “NEW TAX ON EARNED INCOME: WAGES, SALARIES AND COMMISSIONS.”)
Q: Who is a “High Income” Taxpayer?
A: Those whose tax filing status is “single” will be subject to the new unearned income taxes if they have Adjusted Gross Income (AGI) of more than $200,000. Married couples filing a joint return with AGI of more than $250,000 will also be subject to the new tax. (The AGI threshold for married filing separate returns is $125,000.)
Q: Are the $200,000 and $250,000 thresholds indexed for inflation?
A: No. Thus, over time, more individuals may become subject to this tax.
Q: When does the new 3.8% Medicare tax take effect?
A: The new Medicare tax on unearned income will take effect January 1, 2013.
Q: What is “unearned” net investment income?
A: Unearned income is the income that an individual derives from investing his/her capital. It includes capital gains, rents, dividends and interest income. It also comes from some investments in active businesses if the investor is not an active participant in the business.
The portion of unearned income that is subject both to income tax and the new Medicare tax is the amount of income derived from these sources, reduced by any expenses associated with earning that income. (Hence the term “net” investment income.) Thus, in the case of rents, the taxable amount would be gross rents minus all expenses (including depreciation) incurred in operating the rental property. So if gross rents were $100,000 with associated expenses of $40,000, net rents of $60,000 ($100,000 minus $40,000) would be included in Adjusted Gross Income (AGI).
NAR Frequently Asked Questions
Health Insurance Reform
National Association of REALTORS® Government Affairs Division
500 New Jersey Avenue, NW, Washington DC, 20001
REALTOR® is a registered collective membership mark which may be used only by real estate
professionals who are members of the NATIONAL ASSOCIATION OF REALTORS®
and subscribe to its strict Code of Ethics
Q: So the new tax will apply to rents from investment properties that I own?
A: Maybe. Remember that net investment income includes only net rental income. Thus, gross rents would not be subject to the tax. Rather, gross rents would be reduced (as they are under the income tax) by all allowable expenses, including depreciation, cost of repairs, property taxes and all other expenses related to the property. AGI includes net income from rent, so if your AGI is above the $200,000/$250,000 thresholds, then the rental income might be subject to the tax. For many investment real estate owners, the net rents will be the same as or similar to the amounts reported on their Schedule E, filed with their Form 1040 Income Tax Return. (For calculations, see Q-8, below. See also Q-9 through Q-12 related to capital gain from sale of principal residence, losses on sale and to vacation homes, below.)
Q: Does the tax apply to the yearly appreciation of an asset?
A: No. Capital gains are subject to this new tax only in the year when the asset is sold. The amount of the gain will be measured in the same way that it is for income tax purposes. This rule applies to real estate and all other appreciating capital assets. Net capital gains are taxable only in the year of sale.
Q: How is the new 3.8% Medicare tax calculated?
A: The new 3.8% Medicare tax is assessed only when Adjusted Gross Income (AGI) is more than $200,000/$250,000. (See Q-2 above.) AGI includes net income from interest, dividends, rents and capital gains, as well as earned compensation and several additional forms of income presented on a Form 1040 Income Tax Return.
The tax is NOT imposed on the total AGI, nor is it imposed solely on the investment income. Rather, the taxable amount will depend on the operation of a formula. The taxpayer will determine the LESSER of (1) net investment income OR
(2) the excess of AGI over the $200,000/$250,000 AGI thresholds. Thus, if net investment income is the smaller amount, then the 3.8% tax is applied only to the net investment income amount. If the excess over the thresholds is the smaller amount, then the 3.8% tax would apply only to the excess amount.
For example, if AGI for a single individual is $275,000, then the excess over $200,000 would be $75,000 ($275,000 minus $200,000). Assume that this individual’s net investment income is $60,000. The new 3.8% tax applies to the smaller amount. In this example, $60,000 of net investment income is less than the $75,000 excess over the threshold. Thus, in this example, the 3.8% tax is applied to the $60,000.
If this single individual had AGI if $275,000 and net investment income of $90,000, then the new tax would be imposed on the smaller amount: the $75,000 of excess over $200,000.
NAR Frequently Asked Questions
Health Insurance Reform
National Association of REALTORS® Government Affairs Division
500 New Jersey Avenue, NW, Washington DC, 20001
REALTOR® is a registered collective membership mark which may be used only by real estate
professionals who are members of the NATIONAL ASSOCIATION OF REALTORS®
and subscribe to its strict Code of Ethics
Rules of thumb for predicting the application of this tax year to year are not readily determinable, largely because the proportion of net investment income compared to AGI will vary from year to year and from individual to individual.
Q: Will the $250,000/$500,000 exclusion on the sale of a principal residence continue to apply? A: Yes. Any gain from the sale of a principal residence that is less than $250,000 (individual) or $500,000 (joint return) will continue to be excluded from the income tax. The new 3.8% tax will NOT apply to this excluded amount of the gain.
Q: Will the 3.8% tax apply to any part of the gain on the sale of a principal residence?
A: The new Medicare tax would apply only to any gain realized that is more than the $250K/$500K existing primary home exclusion (known as the “taxable gain”), and only
if the seller has AGI above the $200K/$250K AGI thresholds.
So, for example, if the taxable gain was $30,000 and a married couple had AGI (which would include the taxable gain) of $180,000, the 3.8% tax would not apply because AGI is less than $250,000. If that same couple had AGI of $290,000, then the application of the 3.8% tax would be subject to the same formula described above. The $30,000 taxable
gain on the sale would be less than the $40,000 excess above $250,000 AGI, so the $30,000 gain would be subject to the new 3.8% tax.
Q: Is rent from a vacation home subject to the 3.8% tax? And what about the gain on sale of a vacation or rental property?
A: The application of the tax will depend on whether the vacation home has been rented out, the period for which it has been rented and whether the property is solely for the enjoyment of the owner. If the owner has rented the home out to others, then the 14-day rent exclusion will continue to apply. Thus, if the owner rents the property to others (including family members) for 14 or fewer days, there would be no net investment tax. (Note that no deductions for expenses would be available, as under current law.)
If the home has been rented to others (including family members) for more than 14 days, then the rents (minus related expenses) would be considered as part of net investment income and could, depending on AGI and the calculations described above, be subject to the new tax.
If the vacation home has been used solely for personal enjoyment (i.e., there is no rental income and no associated expenses), then a gain on sale would be treated as net investment income and could be subject to the tax, depending on AGI. Similarly, if the property had generated rents, any net gain on sale could also be included in net investment income. The amount of the tax (if any) would depend on the calculation formula, above in Q-8.
NAR Frequently Asked Questions
Health Insurance Reform
National Association of REALTORS® Government Affairs Division
500 New Jersey Avenue, NW, Washington DC, 20001
REALTOR® is a registered collective membership mark which may be used only by real estate
professionals who are members of the NATIONAL ASSOCIATION OF REALTORS®
and subscribe to its strict Code of Ethics
Q: My rental property generates a net loss each year. How will those losses be factored into the new tax? And what if I have net capital losses when I sell?
A: Net losses from rents and net capital losses reduce AGI. Thus, the losses themselves would not be subject to the tax. If, after losses, AGI still exceeds the High Income thresholds, the 3.8% tax would still apply if there were any interest or dividends income. (Capital losses reduce capital gains. If losses exceed gains, no more than $3000 of capital losses may reduce other income in any year.)
Note that passive loss limitations will continue to apply to rental income and loss.
Q: All of my income is derived from real estate investments that I own and operate myself. Will my rents and gains be subject to the new tax?
A: No. If the ownership and operation of real estate you own is your sole occupation, then those activities are what’s called your “trade or business.” Income derived from a trade or business is not subject to the new 3.8% tax, but could be subject to the 0.9% tax on earned income.
If the owner of rental properties has a “day job,” however, real estate investments are not considered as a trade or business, but are rather considered as investments, even if they are a major source of income. Note that many Realtors engage in business activities are that are the “typical” selling, leasing and brokerage endeavors usually associated with the term “Realtor.” If they also own real estate assets as part of their own personal investment portfolio, the rents from that portfolio could become subject to the new 3.8% tax on net investment income, depending on AGI.
Q: Is there a real estate “sales tax” or a transfer tax in the new health care bill?
A: No. There is neither a real estate “sales tax” nor a real estate transfer tax in the bill.
Q: Will “High Income Filers” lose any portion of the Mortgage Interest they are allowed to deduct?
A: No. The mortgage interest deduction is unchanged. No cap was imposed on any itemized deductions.
Q: Why is this new tax called a “Medicare tax?”
A: The revenues generated from this tax will be allocated to the Medicare Trust Fund that is part of the Social Security System. That fund is currently on shaky financial footing. The additional revenues generated from the new earned income and unearned income taxes are intended to shore up the Medicare Trust Fund.
NAR Frequently Asked Questions
Health Insurance Reform
National Association of REALTORS® Government Affairs Division
500 New Jersey Avenue, NW, Washington DC, 20001
REALTOR® is a registered collective membership mark which may be used only by real estate
professionals who are members of the NATIONAL ASSOCIATION OF REALTORS®
and subscribe to its strict Code of Ethics
Q: How will this new tax affect marginal (the highest) tax rates when it is combined with existing law and with the possible expiration of the Bush tax cuts enacted in 2001?
A: Marginal tax rates are the tax rates assessed on the “last” dollars included in taxable income. If the Bush tax cuts are allowed to expire, then the marginal rates for upper income individuals will increase, particularly for capital gains income. The chart below reflects the impact of those changes, presented based on implementation of current law effective dates.
MARGINAL TAX RATES – 2010 – 2013*
(Marginal Tax Bracket is Rate Imposed on Last Dollar of Income)
Year
Income Category
Maximum Marginal Rate without Medicare
Maximum Rate with
Medicare (Employee Only – 1.45%))
Maximum Rate with Medicare (Self-employed – 2.9%)
2010
(Current Law)
Ordinary Income
35%
36.45%
37.9%
Capital Gains, Dividends
15%
15%
15%
Rental Income, Interest
35%
35%
35%
2011
(Expiration of
Bush Tax Cuts)
Ordinary Income
39.6%
41.05%
42.5%
Capital Gains
20%
20%
20%
Dividends, Interest
39.6%
39.6%
39.6%
Rental Income
39.6%
39.6%
39.6%
NAR Frequently Asked Questions
Health Insurance Reform
National Association of REALTORS® Government Affairs Division
500 New Jersey Avenue, NW, Washington DC, 20001
REALTOR® is a registered collective membership mark which may be used only by real estate
professionals who are members of the NATIONAL ASSOCIATION OF REALTORS®
and subscribe to its strict Code of Ethics
2013
(Adds new Medicare Taxes)
Ordinary Income
(Adds 0.9% tax on Earned Income)
39.6%
41.95%
43.4%
Capital Gains
(Adds 3.8% tax on Unearned Income)
20%
23.8%
23.8%
Dividends, Interest
(Adds 3.8% tax on Unearned Income)
39.6%
43.4%
43.4%
Rental Income
(Adds 3.8% tax on Unearned Income)
39.6%
43.4%
43.4%
*Several special calculations actually increase the marginal tax rates of many upper income individuals. These include the loss of the personal exemption, loss of some itemized deductions and special self-employment tax deductions and rate adjustments. This chart does not reflect those special calculations because their impact will vary from taxpayer to taxpayer.

A pretty good MSN article on things to do around the house In Febreuary

Don’t let winter slip away without using the cold, wet weather to help you detect where your home is leaking water and heat, giving you a chance to seal it up tight and develop a wish list for energy-saving improvements. Your first order of business inside your home is to make sure no water is getting in.

Carefully check every spot where condensation or water could enter your living areas and storage spaces. Take along a pad of paper and a pencil and take detailed notes as you scrutinize ceilings, under the roof, under the eaves and along window and door frames and ventilation seals. Be particularly careful to check under toilets, sinks, tubs and showers. Use a flashlight to check the crawl space or basement walls and floors and the underside of the first-story floor. You’re looking for visible moisture and for stains caused by moisture. When you find something, the remedy will depend on the source of the leak. You may just need to recaulk around a tub or window, or you may need to call a plumber to replace a leaking fixture


Here are some other tasks to tackle inside your home this month:

Change the shower curtain. While you’re checking for leaks in the bathroom, see if the shower curtain needs replacing. Damp shower curtains can grow unhealthy mold and mildew and contribute to mold problems in the tub and shower, so swap yours out periodically and make sure to open and air out the shower enclosure when you’re done bathing.

Batten down the hatches. Find and seal energy leaks. Grab a pad and pencil to note any spots that you can’t address right away. Arm yourself with a tube of caulk to fill small cracks and a spray can of insulating foam sealer for larger gaps. Tour your home feeling for cold air entering through cracks in chimneys and window and door frames, and cracks around appliance vents, electrical and plumbing fixtures and furnace ducts. Remedies might include adding weatherstripping to a door frame or applying fresh caulk to window frames.

Run the numbers. Get an idea of how much energy a home the size of yours typically uses by entering detailed information about your dwelling into the Home Energy Saver tool. The tool lets you calculate your home’s energy use. It also lets you estimate the energy savings from a variety of improvements, such as adding insulation, replacing windows and purchasing high-efficiency appliances. Experts from the Energy Department, the Environmental Protection Agency and other state and federal agencies collaborate in sponsoring the site.

Conduct a home energy audit. If you’ve sealed the obvious leaks and your home is still inefficient, you’ll get more detailed information from a professional energy audit. The auditor can recommend energy-saving improvements and point out those that will most improve efficiency. Learn more about energy audits and how to find a professional auditor at the Energy Department’s Energy Savers site. Auditors use a blower door test, a thermographic scan and, occasionally, a perfluorocarbon tracer gas air-infiltration measurement technique to learn how weather-tight your home is. Tips: Check a contractor’s references thoroughly and check for complaints at the Better Business Bureau and your state attorney general’s consumer protection office (find your attorney general through the National Association of Attorneys General). The Energy Department advises finding a contractor who uses a calibrated blower door and who does thermographic inspections. Expect to pay roughly $300 to $500. In some cities, utility companies or government agencies do the work or help with the fees. For example, in Austin, Texas, the city utility performs and subsidizes audits so homeowners pay only $50 or $150, depending on the type of audit. Austin screens and recommends contractors, too.

Clean out storage areas. Get a head start on spring cleaning by attacking a cluttered storage space. Whether you go after the garage, attic, laundry room or garden shed, your home benefits when you get rid of rusting tools, leaking fluids and household chemicals. Start by taking everything out of the space and piling it up outside. Clean the empty space, then go through the items, trying to let go of everything you haven’t used in the last year. Make four piles: stuff to keep, trash, donations and recycling, and hazardous waste. Open paint cans to dry the paint completely before disposing. Recycle batteries so the lead they contain doesn’t contaminate ground water. Rules for disposal vary by locale. Call your waste-disposal company or the county landfill to learn where and how to dispose of hazardous waste.

Get a fire extinguisher. Better yet, get several. Buy fire extinguishers for each type of fire you might encounter at home and place them where you’ll need them. For example, use the A-B-C class for living areas and in workshops and garages. For the kitchen, get a specialized extinguisher capable of putting out class B (grease) and C (electrical) fires. For living and sleeping areas and fireplaces, get a multipurpose A-B-C that also works on fires consuming wood, cloth, trash and paper. (Read “9 tips to be prepared and stay safe in home emergencies.”) Inspect extinguishers regularly to ensure the gauges read 100%. The city of Renton, Wash., explains how to purchase, use and service and where to place residential fire extinguishers.

Outside
February is a transitional month in much of the U.S. Winter storms may continue to cause damage to home exteriors and landscaping, but spring is in sight and you can begin working in the garden to prepare for warmer weather.

Check for storm damage. While you’re outside, walk around the house looking for missing or damaged siding and shingles. Remove fallen branches and storm debris from around the house.

Clean the gutters. It’s easier to scoop up the leaves and debris in your gutters when the stuff is wet, so pull out your ladder and clean the gutters after a soaking rain. You should do this at least twice a year, but may need to do it monthly if your home is surrounded by trees. For more information, see “Gutter cleaning and care.”

Mulch garden beds. By the end of the month, the ground has thawed in many parts of the country and it’s time to start warding off weeds. If you didn’t mulch in early winter, now is the time to add a layer to discourage weeds.

Prune ornamental grasses. Clean up pampas grass and other ornamental grasses by cutting them in early spring, before new green shoots get tall. Cut the old grass about 2 to 4 inches above the new green shoots. Wear gloves and use a chain saw on big, unwieldy pampas grasses. Tackle others with pruning shears or hedge clippers. Cut straight across the top of the clump and rake away the dead stalks to clean up the plant.