Three has been a lot of hype in the real estate world regarding the 3.8% tax associated with the Obama administration’s Healthcare Act. A lot of this hype sounds rather scary for a homeowner who is considering selling their home, or for a buyer who can’t afford additional costs added to their closing costs.
As Realtors, we are members of the National Association of Realtors (NAR), which is a great resource for us whenever we have questions from our clients. As we have heard concerns regarding this tax issue, we thought that it would be a good time to present to you the top 10 things that you should know about the 3.8% tax according to NAR. Hopefully this list will help to sort the facts from the hype.
1.) When you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will NOT be subject to this tax.
2.) The 3.8% tax will NEVER be collected as a transfer tax on real estate of any type, so you’ll NEVER pay this tax at the time that you purchase a home or other investment property.
3.) You’ll NEVER pay this tax at settlement when you sell your home or investment property. Any capital gain you realize at settlement is just one component of that year’s gross income.
4.) If you sell your principal residence, you will still receive the full benefit of the $250,000 (single tax return)/$500,000 (married filing joint tax return) exclusion on the sale of that home. If your capital gain is greater than these amounts, then you will include any gain above these amounts as income on your Form 1040 tax return. Even then, if your total income (including this taxable portion of gain on your residence) is less than the $200,000/$250,000 amounts, you will NOT pay this tax. If your total income is more than these amounts, a formula will protect some portion of your investment.
5.) The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).
6.) The tax goes into effect in 2013. If you have investment income in 2013, you won’t pay the 3.8% tax until you file your 2013 Form 1040 tax return in 2014. The 3.8% tax for any later year will be paid in the following calendar year when the tax returns are filed.
7.) In any particular year, if you have NO income from capital gains, rents, interest or dividends, you’ll NEVER pay this tax, even if you have millions of dollars of other types of income.
8.) The formula that determines the amount of 3.8% tax due will ALWAYS protect $200,000 ($250,000 on a joint return) of your income from any burden of the 3.8% tax. For example, if you are single and have a total of $201,000 income, the 3.8% tax would NEVER be imposed on more than $1000.
9.) It’s true that investment income from rents on an investment property could be subject to the 3.8% tax. BUT: The only rental income that would be included in your gross income and therefore possibly subject to the tax is net rental income: gross rents minus expenses like depreciation, interest, property tax, maintenance and utilities.
10.) The tax was enacted along with the health care legislation in 2010. It was added to the package just hours before the final vote and without review. NAR strongly opposed the tax at the time, and remains hopeful that it will not go into effect. The tax will no doubt be debated during the upcoming tax reform debates in 2013.
The bottom line is that very few homeowners will ever have to think about, or be concerned with paying this tax. The best advice is what we tell our clients to do whenever there are questions about tax implications in a real estate transaction. That advice is, consult your tax professional.
For a more detailed rundown of what the NAR’s position is on this legislation, refer to the handout attached to the link below.
There is a historic event happening tomorrow in Los Angeles which we felt would be worth mentioning. If you’re wondering why we’re so excited about a space shuttle arrival in Southern California, here is a little history regarding the Ransom-McKenzie connection to the Space Shuttle programs.
When the Space Shuttle program started in the early 80’s, Connie and Roger, along with Rogers’s older brother David, raced out to Edwards AFB in the middle of the night to witness the early morning landing of the first shuttle sent to explore space by NASA. That was April 14, 1981 and the shuttle was Columbia. A moment in history celebrating the first test flight of what was , at the time, the most complex spacecraft ever built.
Columbia’s flight was the first of many shuttle excursions into space. Some successful, some tragic. In fact, the Columbia Shuttle met a tragic end in 2003 as she disintegrated during re-entry on her 28th mission.
With NASA’s change in direction, and the retirement of the Shuttle program, the next stops for these amazing ships are museums. Here in Southern California we are fortunate to have the shuttle Endeavour arriving for exhibit at the California Science Center. Endeavour is actually the “youngest” of the Space Shuttle ships. Her new, temporary, home will be the Samuel Oschin Pavilion which opens October 30th. Eventually Endeavour will be the centerpiece of the Samuel Oschin Air and Space Center which will be a new wing at the museum.
The Science Center is very excited about the arrival of the Endeavour Shuttle. “Space shuttle Endeavour is now on her way home to California! Flying across the country on the back of a specially modified Boeing 747 Shuttle Carrier Aircraft, Endeavour will arrive at LAX (weather permitting) on Friday, September 21, 2012 .
Around 10:30 am on Friday, or shortly after, watch for flyovers of Endeavour in the Los Angeles area. There will be opportunities to see Endeavour passing regional landmarks such as, its future home at the California Science Center, Los Angeles City Hall, Disneyland, the Getty Center, Griffith Observatory, Long Beach Aquarium of the Pacific, Malibu, NASA’s Jet Propulsion Laboratory in Pasadena, Queen Mary, Universal Studios and Venice Beach, among others.”
If you have time, it might be worth a drive into LA. The final chapter of NASA’s Space Shuttle programs.
The Ransom-McKenzie Team has represented a number of Riverside’s Mid-Century gems this year. We discuss the historic significance of this style of architecture in our most recent Your Villa feature article. To view the article and the fabulous pictures which accompany it, click on the caption below.
Riverside’s neighborhoods have surprises around every corner, you just need to know where to look. Give Connie & Charlotte a call if you would like us to help with your next Riverside real estate adventure.
We’re always surprised when we hear people ask if there is “anything to do in Riverside”. Granted, we’re not Los Angeles or San Francisco, but The City of Arts & Innovation has a lot to offer our residents. Not only are there exciting arts venues in the City, we also are host to a plethora of community organizations that offer opportunities for residents to get together and find common interests to gather around.
One such group is the Riverside Newcomers & Neighbors group. When Charlotte moved back to Riverside after a 20 year hiatus this was a group she and her husband joined. It offered a link to new and old acquaintances in the city and an opportunity to socialize with people who had like interests. Whether you are new to Riverside or not, this is a fun group of individuals. There are people who have been members for over 20 years alongside people who just joined 2 months ago. This provides a great way for you to get to know Riverside from a multitude of perspectives.
We bring this up today because this week, the Riverside Newcomers & Neighbors will be holding their annual Open House at City Hall! The event will take place on the 7th floor in Grier Pavilion. This is an opportunity to learn more about the group, including information on their various interest groups. Join fellow Riversiders and become a member of this vibrant group as we celebrate the start of a new year with Friends & Neighbors. The event details are listed below.
Date: Wednesday, September 19th
Time: 6:00pm – 8:00pm
Place: City Hall’s Grier Pavilion, 7th Floor
Please e-mail the RNN at firstname.lastname@example.org if you plan to attend.
If you can’t make it to Wednesday’s event but would still like to join. You can fill out an application online to join the club. Just click here to visit the RNN website.
As we mentioned in our post last week discussing Riverside’s quality of life, we have a rich connection to the arts in Riverside. This connection extends out to our surrounding cities as well. Southern California in general is a mecca for artists, and we’re withing driving distance to the hub of arts in both Los Angeles and Orange County.
This past weekend Charlotte’s family took their exchange student into LA to view the sights. This is something we don’t often do, even though we’re so close to the “City of Angels”. One of the destinations on the trip was to see the recently installed exhibit Levitated Mass at the Los Angeles County Museum of Art. (LACMA) This piece had a particular interest to us since the core of the installation, a giant boulder, came from the Riverside area. Connie and Roger also journeyed into LA to see the exhibit after seeing Charlotte’s postings on Face Book so it became a virtual Team experience!
The story of the boulder’s journey from The Quarry in Jurupa Valley to it’s new home on exhibit at LACMA is an amazing one. You may have seen the news last spring when the Boulder was moved under the cover of darkness from Riverside to Los Angeles. However, the real vision for the installation and the search for the perfectly shaped boulder began years before. Artist Michael Heizer first conceived of the idea in 1969. Heizer, who is known for oversize, site specific sculptures, tried his first version of this piece to no avail. The boulder chosen at that time broke the crane being used to move it and the vision was left incomplete. Since that time and after years of searching and study the perfect rock, a 340 ton piece of granite, was located here in Riverside!
Back to March 2012 and the boulder’s 11 night journey from the Quarry in Riverside to LACMA. Connie went out to see the giant rock as it rested during the day on one of the legs of it’s journey. The logistics of getting it to LA were quite extensive. People came out in droves just to see the spectacle of a 340 ton boulder being moved through the city streets and freeways. Just to give you an idea as to the size of this piece, here is a picture of the truck it took to get the boulder from point A to point B.
While the boulder, or monolith as LACMA has been calling it, is one component of the artwork, the 456-foot-long slot beneath it and the surrounding environment complete the entire Levitated Mass installation. According to the artist and LACMA the installation ” speaks to the expanse of art history, from ancient traditions of creating artworks from megalithic stone, to modern forms of abstract geometries and cutting-edge feats of engineering.”
One of the most remarkable things about this piece is being able to walk under the boulder as you walk along the trench. It is a very awe inspiring perspective.
Overall, a visit to Los Angeles and LACMA is a great adventure. If you have children, there is a great program at the museum where children under 18 get in free, and they can bring an adult “guest” in with them for free! The Levitated Mass is not the only exhibit there that children will enjoy, there are plenty of activities to keep everyone in the family occupied.
For those of you looking for more information regarding the Levitated Mass installation, check out this time elapsed video of the installation site construction. Time Lapse Video Of Levitated Mass Construction
Here in Riverside, we live in a gardening mecca. Year round vegetable gardens are one of the joys avid gardeners appreciate here in our temperate climate. This time of year especially, many gardens are overflowing with produce. So much so that we often struggle with what to do with the fruits of our labor. Tomatoes, strawberries, peppers and squash varietals are abundant in every garden right now.
When chatting with one of our neighbors this past weekend, after she brought over a full grocery bag of patty pan squash, she commented that she had so much she was having a hard time keeping up and did not know what to do with it all. She was tired of sliced, sauteed patty pan. Well, we have a great recipe for that or any type of squash. The great thing about this recipe is that it can be changed up to suit whatever taste you’re craving at the moment.
These Zucchini (or any other squash) cakes are just like crab cakes, only we’re using grated squash instead of crab meat. Here are the basic ingredients:Grated Zucchini (or other summer squash) Fresh Chopped Herbs Fresh Eggs Cayenne Pepper (to taste) Panko Bread Crumbs Parmesan Cheese
The amounts of these ingredients in your recipe will vary depending on how much squash you have. You can choose whatever herbs you have growing in your garden. Basil, Sage, Dill, Tarragon….whatever you’re in the mood for. The same goes for the cheese. We’ve used Mexican Cheese, Feta, Romano….whatever sounds good.
Zucchini is a very watery vegetable, so you will need to salt the grated squash and put it in a colander to drain for about 30 minutes to an hour. After the squash has rested, rise it out in the colander and squeeze the grated zucchini out in a kitchen towel.
Once the ingredients are mixed together, you should have a slightly mushy consistency. They should have enough bread crumbs and egg to hold them together on the grill.
We hope you enjoy this summer treat! The zucchini cakes can be served as the main entree with a side salad, or can be dished up along with your favorite grilled meat. One of our favorite options is fresh sockeye salmon!
As if to validate our assertions, the NAR reports came out at the end of the week stating that we were right. Well, OK, they did not name the Ransom-McKenzie Team directly, but they did confirm what we have been seeing in the market place. As artists, we are very visual people and we know that some of our readers must be too, so here is a great visual to wrap up this week’s good news.
We’re looking forward to more good news in the coming months!
The city of Riverside has had International Connections ever since we established our first sister city relationship with Sendai, Japan over 60 years ago. Riverside has been a leader in Sister City programs ever since.
We have a total of eight sister cities currently. They are:
- Sendai, Japan (1957)
- Cuautla, Mexico (1968)
- Ensenada, Mexico (1976)
- Jiangmen, People’s Republic of China (1997)
- Gangnam, Republic of Korea (1998)
- Hyderabad, India (2000)
- Obuasi, Ghana (2008)
- Erlangen, Germany (2011)
The International Relations Council of Riverside coordinates and works with our sister cities to plan exchanges of people, technology, information and talent. In 2010 the committee created a brochure to let cities know of all the features our City has to offer which is also a great resource for new residents and visitors to the city.
This year Charlotte’s son participated in a sister city exchange program with our sister city, Erlangen. Currently her family is also hosting a student from Erlangen. This is the third year we have had students travel from Erlangen for an exchange program, and this year is by far the largest. We have 15 German students who all arrived to our fair city last night. They are looking forward to exploring Riverside and Southern California, as well as attending school at North, Poly and King High Schools once school starts at the end of the month.
For more information on Riverside’s International Relations Council, visit the City’s Webpage here. If you’re interested in hosting a foreign student, be sure to let us know! We’re excited about this wonderful opportunity for all of our students on both sides of the exchange.
We have lived in Riverside for over 40 years. Over this time span, the City has gone through multiple metamorphoses, both good and bad. We’ve all seen the most recent one happening over the past decade. With venues such as the newly renovated Fox Performing Arts Center and the Culver Center of the Arts which have both contributed greatly to the revival of performing and visual arts in town, Riverside is beginning to get noticed. We have thousands of performers and hundreds of arts organizations in our region that could benefit from a stronger local participation in the arts.
The City of Arts & Innovation
The City’s tagline has been in use for 3 years now and we’re beginning to see the benefits of living in the City of Arts & Innovation. In the past, Riverside has been a mecca for home buyers who came here solely for the affordable homes. When compared to LA or Orange County, we were always the more affordable option. But there is a new force driving the economic development of Riverside and the Inland Empire as a whole these days. The region seems poised for a lot of exciting changes and developments, all of which are sure to enhance our quality of life.
It is not just a question of supporting the arts, it boils down to a question of supporting the quality of life here in the Inland Empire. Mayor Loveridge credits the City’s strong support for the arts as a key boost and energy driver for our City’s Renaissance efforts as we create a city that is the place to be not just because of affordable housing, but because we have a quality of life which makes it enjoyable to be here.
We couldn’t agree more. Arts & culture, education, and entertainment are key reasons to love Riverside. We currently have a sustainable network of art, music, entertainment and education. With the positive things going on in Riverside, it is a wonderful place to call home. The California Arts Council is taking notice, The Culver Center of the Arts is continuing to produce innovative arts projects, The Fox Performing Arts Center is bringing a variety of performers to town, and the Universities are growing and expanding, including plans for UCR’s Medical School. All of these efforts will continue to enhance our quality of life here in the City of Arts and Innovation.
How is your quality of life in Riverside? We’re curious to hear what your favorite things to do in town are. Leave us a comment and tell us what you enjoy. Whether it is the fabulous parks, great outdoor spaces and places, or the art scene, we would love to hear from you about your choice Riverside activity. Keep the conversations going! Join our Blog Riverside! and encourage others to as well.