The Truth About the 3.8% Tax Going Into Effect

-- information provided from the Wisconsin REALTORS® Association (WRA)

Now that the Supreme Court has upheld the health care legislation, all of its major provisions remain in effect, including the new tax that was designed to affect upper income taxpayers. The 3.8% tax is imposed ONLY on those with more than $200,000 of Adjusted Gross Income (AGI) ($250,000 on a joint return). The tax applies to investment income, defined as interest, dividends, capital gains and net rents. These items are all included in an individual's AGI. A formula will determine what portion, if any, of these types of investment income would be subject to the tax.

The tax is NOT a transfer tax on real estate sales and similar transactions.

Not long after the tax was enacted, erroneous and misleading documents went viral on the Internet and created a great deal of misunderstanding and made the tax into something far more draconian than the actual provisions.

The new tax does NOT eliminate the benefits of the $250,000/$500,000 exclusion on the sale of a principal residence. Thus, ONLY that portion of a gain above those thresholds is included in AGI and could be subject to the tax.  

Eliason Realty of the North, Inc. encourages you to contact your accountant to fulyl understand how this tax may or may not apply in your specific situation.  

The amount of tax will vary from individual to individual because the elements that comprise AGI differ from taxpayer to taxpayer. Please visit these links for additional in-depth information: (A video) (FAQs) (informational brochure)

Also see the article at


-shared from the Wisconsin REALTORS® Association by
 Eliason Realty of the North, Inc.
Vilas County Wisconsin Real Estate Brokers 

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