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Lots of real estate sellers are not aware that even if they don't have to pay capital gains on the sale of a 3 million-dollar house they still might have to pay a new Medicare tax enacted in 2013. Does anybody know that if property is inherited and gets the step up in basis to current market value thus escaping the Fed and state capital gains taxes the person inheriting it still has to pay the Medicare tax?
The estate pays the tax and there is a 5 million or 10 million dollar value deduction. It's 45% after that. Heirs inherit the basis the property was valued at. So if a $3 million dollar house is the only thing in the estate(doubtful) it gets transferred at present value basis rather than whatever it was bought for. If you later sold for higher than basis you'd have to pay it but otherwise I don't think so.
This is one of those reasons why they won't actually get rid of the estate tax since everyone who's under the cap would see a significant tax hike if inheritance was logged as normal income.
By the way most people roll the Medicare cap gains tax into normal cap gains calculations. The intent of it is so you can't structure your investments to avoid paying into Medicare.
If you later sold for higher than basis you'd have to pay it but otherwise I don't think so.
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This is why you shouldn't take tax advice from strangers on the internet. The 3.8% tax is an Obamacare tax and applies only if you make over $200K if you are single and $250k as a couple.
If you inherit property, you get the stepped up capital gains basis when you sell which is the value on the date of death.
The estate pays the tax and there is a 5 million or 10 million dollar value deduction. It's 45% after that. Heirs inherit the basis the property was valued at. So if a $3 million dollar house is the only thing in the estate(doubtful) it gets transferred at present value basis rather than whatever it was bought for. If you later sold for higher than basis you'd have to pay it but otherwise I don't think so.
This is one of those reasons why they won't actually get rid of the estate tax since everyone who's under the cap would see a significant tax hike if inheritance was logged as normal income.
By the way most people roll the Medicare cap gains tax into normal cap gains calculations. The intent of it is so you can't structure your investments to avoid paying into Medicare.
huh , you are not even talking about the same subject ! this has nothing to do with estate taxes at all . there is a penalty tax on capital gains and investments based on income
Sorry, still confused. I'm going to inherit two pieces of real estate worth conservatively 1.2 million and I am the sole heir. I will get the step up in basis so I won't have to pay any capital gains taxes. I plan to sell them immediately upon inheriting them so I don't have to worry about future appreciation. But 1.2 million is far above the 200K threshhold set by the obamacare law so I'm wondering if, despite escaping the Fed and state capital gains, I'm still on the hook for 3.8% of everything above 200K or roughly 1 million, or if I escape the Medicare tax entirely. I've googled this ad infinitum but cannot find any specific answer on this question. Help!
Sorry, still confused. I'm going to inherit two pieces of real estate worth conservatively 1.2 million and I am the sole heir. I will get the step up in basis so I won't have to pay any capital gains taxes. I plan to sell them immediately upon inheriting them so I don't have to worry about future appreciation. But 1.2 million is far above the 200K threshhold set by the obamacare law so I'm wondering if, despite escaping the Fed and state capital gains, I'm still on the hook for 3.8% of everything above 200K or roughly 1 million, or if I escape the Medicare tax entirely. I've googled this ad infinitum but cannot find any specific answer on this question. Help!
UGH!! You are comparing apples and oranges. Your income has to be above $200k to pay that tax. And you won't have capital gains if you are selling close to the date of death anyway.
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