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To actually get -- is about to have a huge impact on many homeowners.
Tax rates are expected to skyrocket at the end of the year if congress fails to act -- tonight we're drilling down.
We're focusing on those in particular looking to sell their homes.
They can be hit very hard by the tax man with Warren joined by rich cop but managing director for wealth -- financial planning.
So rich tell me what is this tax said that home sellers are going to a counter.
Well it's twofold one is the capital gains rate nothing happens no changes are made to capital gains rate are.
The highest rates gonna go from 15% to 20% next year so that's 33% -- directs an effect which you can take out -- house right exactly so when he gained.
20% in addition to that you have this new Medicare tax.
On net investment income which is gonna include gain on the sale of homes and that's another three point 8% -- just it.
-- -- only hits people who single people over 200000 -- -- come.
Joint filers over 250000.
But it still three point 8%.
In addition to the 5% increase so we're looking at almost 60% increase in capital gains tax.
How significant mean a lot of people who -- out there trying to sell their house.
What do you do get to sell before the end of the year well that's one of my tax planning tips -- mean if you're looking to sell a home this is the time to do -- I mean.
You want to actually start marketing your home now let's think about this you know takes couple months to market takes may be a buyer to get.
45 days sixty days get a mortgage you need to have that -- completed by 1231 of this year in order to benefit from the lower rates.
-- how we understand this does it affect.
My primary don't -- all my vacation home sale which of these houses is going to be impact well that actually could affect.
All your homes but the one thing to know about a primary residence is that you do have the home exclusion of gain and what that means -- for single filer.
You could exclude 250000.
Dollars of gain.
And Ford joint father up to 500000.
Anything above that you're paying capital gains tax in the Medicare tax is subject to hit that access is well this is really.
That affect people in terms of their financial planning for their retirement if you were selling their house could you gonna retire or move somewhere probably -- have a mind hide how much expect to take out of that house.
This is -- -- some plans likely.
Absolutely and you know I mean look we -- always talking about the real estate market not having done well but you know think about people bought homes in the ninety's.
And there are selling the home today you could easily find people who bought a home for 200000 summit for 80900000.
Well in excess of any exclusion and think about the vacation home there's no exclusion to -- only for your primary -- so it's big dollars at stake here.
-- okay you also went up a little bit about real estate in your IRA other ways to invest -- just some other thoughts I had you know for people thinking about this.
You know if you're an investor years you're gonna be hit with these capital gain -- so one of the ideas.
I thought about was you know by real estate your IRA -- can't buy a personal residence in RA but you can buy.
Investment property -- -- -- Someone might say -- -- I hear it -- be causing ordinary income tax but the reality is.
You know you will not be tax -- that until and when you sort of take distributions at a very which could be a very long time seat it's still sell the property not pay any tax within your -- The more I hear about tax men get in the more scared I again I can tell you they're all kinds of impacts.
There were only beginning now to fully -- yeah and you know it's it's across the board capital gains is not just about real estate so one thing to also think about as a tax planning opportunity -- Take -- losses this year.
Because tax losses even from your investment portfolio those losses can offset gains realized to the -- of your home.
We're working it out can you help this rich -- thanks for coming on tonight really appreciate your.