Due to a looming new Medicare tax on investment earnings, you may be tempted to unload your principal residence to the first qualified buyer you can find. In a word—don’t.
Despite what you may have heard or read, the 3.8% Medicare tax, which is scheduled to take effect in 2013, won’t erode the amount of gain you can shelter from tax through the home sale exclusion (up to $250,000 for unmarried individuals or $500,000 for married joint-filing couples). The tax consequences for a future home sale, if any, may be relatively small.
But that doesn’t mean you should keep all your real estate property.
Strategy: Consider putting up a vacation home or rental property for sale. Reason: The $250,000/$500,000 home sale gain exclusion doesn’t apply to any real estate except your principal residence. So gains from other sales may be hit with the extra tax if you have a high income.
Conversely, if you sell property before 2013, you’re in ...(register to read more)