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The Health Care Legislation enacted in 2013, included a 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) or $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 individuals AGI. A formula will determine what portion, if any, of these types of 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, making the tax into something its not.

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

**Contact your tax advisor to see how this may impact you and/or your financial situation**

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