Clarifying the “3.8% health care tax” as it applies to real estate sales.
Quick summary:  as of January, there will be an additional tax of 3.8% on unearned income- which includes capital gains income.
For primary homes- the additional tax only applies if the seller’s adjusted gross income exceeds $200,000 ($250,000 if married), AND the gain exceeds the exclusion amounts ($250,000 for single tax payers; $500,000 married tax payers).
For second homes/investment properties- if the tax payer’s adjusted gross income exceeds $200,000 ($250,000 if married), the 3.8% tax WILL apply to the gain.  This is not a tax on the selling price- it is a tax on the gain (profit).
Therefore, based on the current capital gains rate of 15%, the seller of a vacation home may be required to pay a total tax of 18.8% on the gain.
If the vacation home is held as a rental property, many sellers participate in a 1031 Tax Deferred Exchange. This strategy works if the plan is to acquire a replacement rental property.
For more information: talk to one of the experts at Realtex (a local 1031 Exchange company), or your accountant.
Beach Tag Discussion
The reality: money generated from the sale of beach tags is used to off set the cost to maintain, clean, and guard the beaches.
For more detail, I have attached the article from today’s Press of Atlantic City: Beach Tags
Yes, it’s a user fee- similar to paying a toll on a roadway. Â And, yes, the year round residents and property owners (aka tax payers) buy tags, too.
We purchase 6 seasonal tags each summer; $126 total for the privilege of using “my beach” and sharing it during family visits. Â For that nominal fee, I see the tractors raking the beach each morning, the Borough Public Works crew emptying the trash cans, and the well trained lifeguards in their assigned spot. Â A bargain!