The Anna Maria Island Sun Newspaper

Vol. 11 No. 18 - February 2, 2011


Internet posting skews surtax

The old expression used to be, "Don't believe everything you read in the papers," but we've since updated that phrase to, "Don't believe everything you read on the Internet," even if it's partially true.

There's been an e-mail floating around which beached itself on my computer a week ago that said in part, "Under the new health care bill, did you know that all real estate transactions are subject to a 3.8 percent sales tax? If you sell your $400,000 home, this will be a $15,400 tax, regardless of income."

Since I pay pretty close attention to what's going in Washington, especially as it relates to real estate, I couldn't believe this escaped my fine tuned antenna. It only took about a half hour buzzing around the Internet for faith in my antenna to be restored. Here's what I found:

As we all know, the federal government enacted a sweeping health care reform bill, which in the final Senate version was more than 2,000 pages, longer than "War & Peace." It's no wonder that much of what's contained in that bill is just starting to surface, including a last minute addition. The last minute piece of legislation included a 3.8 percent tax on investment income of upper-income households as a revenue generator to offset some of the costs of the reform, which takes effect in 2013.

Contrary to what is working its way through the Internet, it is not a transfer tax on real estate. It is, however, a surtax levied on certain high income families who also meet other criteria. For example:

To start with you have to be an individual with an adjusted gross income of $200,000 or more or a married couple earning $250,000 or more to even be subject to the tax. Then, certain investment income above these income levels might be subject to the 3.8 percent tax on a portion of that income. Investment income includes capital gains, dividends, interest payments and net rental income, if you own investment property.

There are several different ways this surtax could affect a real estate transaction:

One was is if a couple earns capital gains on the sale of their primary residence over the $500,000 exemption or any capital gains on the sale of a second home, since there is no tax exemption on capital gains for second homes. Also, inherited property is not protected by a capital gains exemption, and neither is investment property.

Remember the actual tax assessed on any of these real estate transactions that involve a capital gain are based on adjusted gross income being over the $200,000 or $250,000 limit. One example I found in an article published by Realtor magazine is a married couple that has a $325,000 adjusted gross income plus $525,000 in capital gains from the sale of their primary home. For this couple, only $25,000 in capital gains income would be subject to the 3.8 percent tax which would amount to $950.

Although the "Medicare tax," as it's being called, since the funds it generates is targeted to go to Medicare, is minor by most tax standards, it's still another consideration for individuals purchasing real estate. In particular, second home and investment buyers will want to pay close attention if and when this tax finally takes effect. Always seek the advice of a professional tax consultant before making any investment decisions.

A little knowledge can be a dangerous thing. A lot of what we read on line is tremendously helpful, some is outright false, and some have pieces of truth mixed up with misinformation. The advice, "Trust but verify," is true now more than ever.

Real Estate Transactions
Closed sales between Aug. 2 and Oct. 9, 2010

Anna Maria

721 North Shore Single family $1,100,000
512 Bayview Place Single family 800,000
216 Palm Ave. Single family 699,000
104 Maple Ave. Single family 667,500
309 S. Bay Blvd. Single family 425,000
780 Jacaranda Rd. Duplex 357,500
216 Archer Way Single family 332,500
204 Archer Way Single family 300,000
333 Tarpon St. Lot 300,000

Bradenton Beach

500 Bay Dr. S. Single family $965,200
2317 Ave. C #300 Condo 315,000
1325 Gulf Drive N. #165Condo 300,000
1325 Gulf Drive N. #166Condo 300,000
1325 Gulf Drive N. #164Condo 285,000
1325 Gulf Drive N. #161Condo 285,000
1325 Gulf Drive N. #264Condo 280,500
501 Gulf Drive N. #103Condo 240,000
1325 Gulf Drive N. #163Condo 239,800
501 Gulf Drive N. #305Condo 227,000
2211 Ave. C Single family 220,000
2311 Canasta Drive Single family 165,000
2412 Gulf Drive. N. #125Condo 160,000
2412 Gulf Drive N. #224Condo 155,000
2412 Gulf Drive N. #225Condo 155,000
1603 Gulf Drive N. #18Condo 150,000
1603 Gulf Drive N. #19Condo 150,000
117 Seventh St. N. #9 Condo 150,000
1603 Gulf Drive N. #33Condo 109,000
107 Sixth St. S. Single family 100,000
2503 Gulf Drive N. #302Condo 100,000
1603 Gulf Drive N. #34Condo 70,000


12909 42nd Terr. W. Single family $1,025,000
11900 Cortez Rd. W. RV resort
#10, #17, #28, #45 Multi-units 619,700
4224 Marina Ct. Condo 525,000
3860 Mariners Way #413Condo 274,900
12329 Baypointe Terr. Lot 140,000

Holmes Beach

528 72nd St. Single family $1,450,000
3212 Gulf Drive Single family 1,300,000
616 Hampshire Lane Single family 775,000
3009 Ave. F Duplex 763,500
403 80th St. Condo 595,000
203 76th St. Condo 584,500
525 74th St. Single family 550,000
612 North Point Drive Single family 525,000
303 61st St. #A Condo 510,000
209 69st St. Duplex 480,000
6200 Flotilla Drive #273 Condo 480,000
227 85th St. Single family 440,000
517 70th St. Single family 416,500
203 82 St. Condo 400,000
519 77th St. Single family 400,000
405 N. Harbor Drive Single family 400,000
614 Concord Lane Single family 399,900
506 74 St. Single family 390,000
405 74 St. Condo 375,000
3706 Gulf Drive. Single family 370,000
6250 Holmes Blvd. #70 Condo 355,000
6200 Flotilla Drive #274 Condo 365,000
322 64 St. Condo 350,000
207 55 St. Single family 305,000
4104 6 Ave. Condo 285,200
609 Emerald Lane Single family 285,000
2903 Ave. B Duplex 278,000
3703 5 Ave. #3 Condo 270,000
309 58 St. Duplex 270,000
3207 6 Ave. Single family 260,000
3803 East Bay Drive #2 Condo 260,000
6919 Holmes Blvd. Half duplex 250,000
2805 Gulf Drive Single family 249,000
3702 Sixth Ave. #4 Condo 230,000
504 Key Royale Drive Single family 223,000
2705 Ave. C Single family 200,900
2710 Ave. C Single family 160,000

Source: Manatee County Property Appraiser’s Office

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