Dear Michael: Is there a new 3.8 percent real estate sales tax or a transfer tax created in heath care bill? If so, who will be subject to the new tax and when does it take effect?
Answer: There is neither a real estate nor a transfer tax under any federal law. The internet has generated several viral items describing such a tax. They are false. The 2010 health care legislation did create a new 3.8 percent tax, but it only applies to a limited group of taxpayers. This 3.8 percent tax will only apply to the unearned income of high income taxpayers.
The new Medicare tax on unearned income will take effect January 1, 2013. Proceeds from the tax will be allocated to shoring up the Medicare fund. Those whose tax filing is for single will be subject to the new unearned income taxes if they have an Adjusted Gross Income (AGI) of more than $200,000. Married couples filing a joint return with AGI of more than $250,000 will also be subject to the new tax. (The AGI threshold for married filing separate returns is $125,000.)
Dear Michael: Can the previous owner of the home I am buying rent from me if I buy their house as a short sale?
Answer: Once you are the owner of a home, you can do whatever you like as long as you make your monthly payments and are not violating any county or state laws. Whether you purchase a home as a short sale, buy it at an auction, in foreclosure, or as a traditional sale, once you are the owner, which means you are on title as owner, the rights to that property is yours.
With that said, if you are planning on renting this home back to the seller, and are obtaining financing, you will need to declare this property as an investment property as opposed to a primary residence. This is an important point because investment property financing rates are higher than primary residence. When declaring a new home purchase as an investment property, your income will need to support all additional debt you may have, which typically also includes a primary residence mortgage.
Dear Michael: I am being told that the real estate market has had a recent surge. Are you seeing any signs that this is the case?
Answer: Properties that are priced competitively are now selling and in some cases in multiple offers. The principal attributes causing this surge are record low interest rates and a lack of inventory. If you are looking to purchase, this is still a good time. All signs are indicating that we are rebounding from the bottom. Keep in mind that these signs can also be misleading as no-one really knows what the future holds. So, my advice is that if you are ready and able to purchase a home, this would probably be a very good time.