Considering Selling Your Santa Cruz Home? Get the Scoop on the 3.8 Percent Real Estate Tax in the Healthcare Bill

Posted by Lauren Spencer on Wednesday, September 26th, 2012 at 1:01am.

If you’re considering selling your Santa Cruz home, you may have heard rumors that there is a new tax going into effect in January, 2013. Here’s the rundown on what the tax really is – and isn’t. 

The new tax is called the ‘‘Unearned Income Medicare Contribution.” It is a 3.8 percent tax on the net investment income of high-income taxpayers. The tax will apply to those with an adjusted gross income of more than $200,000 ($250,000 for joint filers), with no indexing for inflation.

The Good News
Odds are that you will never pay this tax. 

Why You Most Likely Won’t Pay the New Tax
The tax will apply to capital gains, not sale proceeds. Because of the current exclusion of gains on home sales — up to $500,000 (joint) or $250,000 (single) on a primary residence — the vast majority of home sellers will not be required to pay this tax. 

Here’s an example: A couple with an adjusted gross income of more than $250,000 (which qualifies them for the tax -- more than 90% of households make less than that) decide to sell their house. They purchased their Santa Cruz home long, long ago for $50,000. They sell the house, miraculously, for $549,000. Because that profit of $499,000 is under the $500,000 profit exclusion amount allowed for couples, they owe no tax. 

The Bottom Line
There are plenty of other taxes that are worth getting upset about; this isn’t one of them. 

If you're looking for more information on selling a Santa Cruz home, I can help. Give me a call today at 831.662.6522 or email me at

For additional real estate information, please visit my homepage at



Capital gains

90% of households make less than that

About Lauren Spencer

Award-Winning Santa Cruz REALTOR®

Lauren Spencer is your local real estate expert, specializing in Santa Cruz real estate and surrounding communities—this is where she lives, works, and plays too. Let her know your questions about the community and county and she'll be happy to fill you in on all you want to know! Lauren Spencer has consistently been voted best local REALTOR in Santa Cruz and is always happy to offer her advice and expertise. Call her at: 800.226.4717.

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