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A viral email continues to circulate indicating that the 3.8 percent tax on some investment income is a tax on all home sales. To help educate REALTORS® and homeowners regarding the 3.8 percent tax passed as part of health care reform in 2010, the National Association of REALTORS® (NAR) has developed the following top 10 list:
1. When you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will not be subject to this tax.
2. The 3.8% tax will never be collected as a transfer tax on real estate of any type, so you’ll never pay this tax at the time that you purchase a home or other investment property.
3. You’ll never pay this tax at settlement when you sell your home or investment property. Any capital gain you realize at settlement is just one component of that year’s gross income.
4. If you sell your principal residence, you will still receive the full benefit of the $250,000 (single tax return)/$500,000 (married filing joint tax return) exclusion on the sale of that home. If your capital gain is greater than these amounts, then you will include any gain above these amounts as income on your Form 1040 tax return. Even then, if your total income (including this taxable portion of gain on your residence) is less than the $200,000/$250,000 amounts, you will not pay this tax. If your total income is more than these amounts, a formula will protect some portion of your investment.
5. The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).
6. The tax goes into effect in 2013. If you have investment income in 2013, you won’t pay the 3.8% tax until you file your 2013 Form 1040 tax return in 2014. The 3.8% tax for any later year will be paid in the following calendar year when the tax returns are filed.
7. In any particular year, if you have no income from capital gains, rents, interest or dividends, you’ll never pay this tax, even if you have millions of dollars of other types of income.
8. The formula that determines the amount of 3.8% tax due will always protect $200,000 ($250,000 on a joint return) of your income from any burden of the 3.8% tax. For example, if you are single and have a total of $201,000 income, the 3.8% tax would never be imposed on more than $1,000.
9. It’s true that investment income from rents on an investment property could be subject to the 3.8% tax. But: The only rental income that would be included in your gross income and therefore possibly subject to the tax is net rental income: gross rents minus expenses like depreciation, interest, property tax, maintenance and utilities.
10. The tax was enacted along with the health care legislation in 2010. It was added to the package just hours before the final vote and without review. NAR strongly opposed the tax at the time, and remains hopeful that it will not go into effect. The tax will no doubt be debated during the upcoming tax reform debates in 2013.
SILVAR members took to the golf course on Monday, September 17 for the 13th Annual Silicon Valley REALTORS® Charitable Foundation Golf Tournament. Over 100 members and guests participated in the special event, which was held at the Los Altos Golf & Country Club, and included a round of golf, a no host cocktail reception, awards ceremony and raffle.
Silicon Valley REALTORS® Charitable Foundation President John Tripp thanked everyone for supporting the annual Foundation fundraiser, which is SILVAR’s biggest event of the year. Proceeds from the annual golf tournament will go to the Silicon Valley REALTORS® Charitable Foundation, which makes grants available to numerous beneficiaries, including scholarships, family and youth programs, housing programs and various other community services in the different communities SILVAR serves.
Congratulations to the tournament’s First Place Winners: Chris Trapani, Justin DeSantis, Peter Ye and Timothy Proschold; Second Place Winners: Brian Cano, Paul Van Every, John McCune and Paul Hossack; and Third Place Winners: Dean Hollingsworth, Adam Smith, Kyle Beagle and Brian Griego. Other winners were Kyle Beagle, Longest Drive – Men; Cammie Brodie, Longest Drive – Women; Dean Hollingsworth and Tawd Frensley, Closest to the Pin – Men; Diane Renna, Closest to the Pin – Women. Receiving a special award for the “Most Fun Team” were Barbara Cannon, Bonnie Kehl, Joanne Fraser and Fred Hibbert.
Moise Nahouraii of Referral Realty – Cupertino won the drawing for a deluxe iPad with data plan (a $1,000 total value). Members still have an opportunity to purchase raffle tickets as the drawing of other raffle items, including the grand cash prize of $5,000, will be held at SILVAR’s Economic Seminar and General Membership Meeting on November 1.
SILVAR would like to extend a special thanks to this year’s generous sponsors! Cart Sponsor: Harrell Remodeling, Inc.; Lunch Sponsor: Sereno Group; Awards Ceremony Sponsor: MLSListings Inc.; Beverage Sponsors: Ratecomb, Property I.D. and Citi; Tee & Hole Sponsors: Alain Pinel Realtors-Los Gatos; EverBank; Law Offices of Peter N. Brewer; Moise Nahouraii – Referral Realty Cupertino; Palo Alto Affiliate Bank; Princeton Capital; Property Inspection Service; Rossi, Hamerslough, Reischl & Chuck; FAREPA (Filipino American Real Estate Professional Association); Property Minder; JCP-LGS Disclosures and Heineken®.
The Consumer Financial Protection Bureau (CFPB) has released a proposed rule that would require mortgage lenders to provide home loan applicants with copies of written appraisals and other home value estimates developed in connection with the application. The rule would ensure that consumers receive information prior to closing about how the property’s value was determined.
The proposed rule would require creditors to inform consumers within three days of applying for a loan of their right to receive a free copy of appraisal reports and home value estimates. Creditors would then be required to provide the reports to consumers as promptly as possible, but no later than three days before closing, regardless of whether credit is extended, denied, incomplete, or withdrawn.
The public has until October 15 to review and provide comments on the proposed rule. The CFPB will review and analyze the comments before issuing a final rule in January 2013.
Every day REALTORS® across the nation put themselves in positions where they can be victims of dangerous crimes. The National Association of REALTORS® has designated the month of September as REALTOR® Safety Month. below are tips for our members and consumers on how to stay safe with social media.
Whether on Facebook, Twitter, LinkedIn or other social media sites, because of the nature of your work, you are likely to have “friends,” followers, and connections whom you don’t really know that well. Following these basic steps can help avoid exposing yourself or your data to risk through social media tools. It is vital to consider what you are sharing through the Internet.
Keep Business Separate
One way that you can make sure you are not revealing too much personal information is simple: set up a business account on each platform. Sure, anyone can figure out that Sally Field, REALTOR®, is the same person as Sally Field—but Sally will only accept requests to connect to strangers on the business account, whether Facebook or Twitter. Her personal account stays private (especially once she familiarizes herself with privacy settings), protecting her family photos, links to her kids’ pages, and personal posts from people she doesn’t know.
Tag! You’re It!
When a friend posts your photo, you may be “tagged” against your will. If you don’t want clients or others to find a reference like this—such as a less-than-flattering photo taken at a late night party—you can remove the tag and/or ask the person who posted it to do so. And be sure to follow up and ask friends to check first before tagging!
Don’t Give Away Passwords
Consider this: One way that hackers manage to crack personal passwords is by searching Facebook for easy answers. They know they may find answers to common security questions such as “What high school did you attend?” and “What are the names of your children?” So keep information about family members, household details, and past events to a minimum in order to help prevent this.
Guard Against Identity Theft
These days, anyone can find all kinds of personal information about anyone else. That doesn’t mean you have to make it easy! For example, if you who want to post your birthday, don’t include the year. (And delete any public comments that indicate your exact age.)
Tweets Are Forever
Social media usage has an impact on your safety, as well as your reputation. Carefully consider each item you share, and be aware that old posts, even if they’ve been deleted, may be copied or saved—and the Library of Congress is actually recording every single Tweet.
Safeguard Client Data
Cyber security goes much deeper than safe use of social media: As a real estate professional, you routinely keep sensitive, personal information about clients on your computer. If this information falls into the wrong hands, it can lead to fraud, identity theft, or similar harms. To avoid potential legal and liability costs of a security breach, develop a data security program based on the Federal Trade Commission’s five key principles to a sound data security program. Details can be found at www.ftc.gov/infosecurity.
To learn about more safety strategies, and access free safety resources, including safety expert Andrew Wooten’s webinar “Social Media and Cyber Safety,” visit www.REALTOR.org/Safety.
(Sources: Andrew Wooten’s REALTOR® Safety webinar “Social Media and Cyber Safety”; www.ftc.gov/infosecurity)
Silicon Valley Association of REALTORS® says ... 