Sale of Residence (after 2012)

High profit sale after 2012 can trigger the special 3.8% Medicare surtax. Starting in 2013, the new health care law imposes a 3.8% tax on investment income of singles with adjusted gross incomes over $200,000 and marrieds above $250,000. Capital gains are treated as investment income. The surtax will be on gains that exceed $250,000 for single taxpayers or $500,000 for married taxpayers. The surtax can take even a bigger bite on sales of second homes where the principal residence exclusions don't apply.