Thinking of selling your home?

Now may be the time act.

Besides the fact that the Boston real estate market has been hot this year and inventory is at absurdly low levels (meaning the value of your home may be a lot higher than you think), waiting to sell your home in 2013 instead of 2012 could have serious financial ramifications as well.

Why? Two big reasons:

1. With the expiration of the Bush tax cuts at the end of 2012, the long term capital gain tax rate will increase to 20% (from the current 15%)
2. On January 1st, 2013, the new 3.8% medicare tax on investment income enacted as part of Obamacare will take effect

With an additional 5% tax on capital gains and 3.8% on investment income (yes, your house may fall into both categories), you may be staring square in the face of an 8.8% tax increase in 2013 on the gain of the sale of your home or investment property in Boston.

A few caveats.

• First, you’re only taxed on gains. No gain, no tax.
• If you are homeowner (not an investment property), you’re still eligible for the $250,000 (single) / $500,000 (married) exclusion on capital gains tax for the sale of your home – the capital gains tax only kicks in on gains over that amount.  However, for investment properties there is no exclusion.
• The new 3.8% Medicare investment tax only kicks in for your investment in you earn over $200,000 (single) / $250,000 (married)

Determining your tax consequences can be complicated, especially for the new 3.8% investment tax.  In order to help you understand the tax and work through the scenarios that might impact you, we have an easy to understand report for you to use:

Bottom Line:

If you have no interest in selling, then this has no impact on you.  Lucky you.

But if you’ve been thinking of selling, and you’ve had a sizable gain on your property, now’s the time to list. The longer you wait, the more high end listings will come to market to beat this deadline (info about this tax has been spreading as 2013 looms), potentially flooding the market with competition.  And buyers who are savvy negotiators may push on you approaching the end of year deadline to drive a hard bargain, knowing you’re possibly looking at absorbing an additional 8.3% tax hit in 2013.

Next Steps:

1. Determine Your Home’s Market Value: Get a free, 30+ page home valuation report detailing your home’s market value and the market outlook in your neighborhood.
2. Determine How the New Tax Will Impact You: View a comprehensive tax brochure with detailed examples for different property types and personal income levels. It will show you how much the tax increase may impact you.