As of January 1 this year, a 3.8 percent Medicare tax on investment income went into effect. However, it only applies to those who exceed the following adjusted gross income (AGI) levels, a figure that currently excludes about 96 percent of all U.S. households.

• Singles - $200,000 or greater AGI
• Married, filing a separate return - $125,000 or greater AGI
• Couples - $250,000 or greater AGI

The Medicare tax is not a sales tax, nor does it apply to all real estate transactions. Moreover, it’s a tax on investment incomes (which may or may not derive from the sale of a property) and typically won’t include capital gains resulting from the sale of a home, providing that home is a principal residence, and as we stated above, only for individuals or couples with AGIs above their thresholds.

The capital gains tax exclusion rule for sales of a principal residence ($250,000 for individuals, and $500,000 for couples) remains in effect. So, if the profits from the sale of the home don’t exceed these capital gains, they’re not tacked onto the net-investment income tally. Therefore, the 3.8 percent Medicare tax wouldn’t apply.

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