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New Taxes Impacting Sellers

Northern Virginia Congestion Relief Act
On May 13th, 2013, after months of deliberation in the Virginia House of Representation, Governor Bob McDonnell signed the Virginia Transportation Bill into law. While there are many facets to this bill including an increase in sales tax (excludes food) in some areas of Virginia, a reduction in the gas tax and a fee to alternative fuel vehicle owners, the impact of the bill most import to sellers is an increase in the state of Virginia Grantors Tax. The Grantor's Tax is a tax paid by the seller that is essentailly a transfer tax associated with the sale of both residential and commercial real estate. The Grantor Tax rate increase becomes effective July 01, 2013. 
Any deeds presented to the Clerk of the Court for recordation on or after that day must reflect the higher fee.
Prior to July 1, the Grantor’s Tax was $1.00 per $1,000 of sales price (or assessed value if the value is higher than sales price.) On July 1, the Grantor’s tax increases to $2.50 per $1,000 of sales price (or assessed value if the value is higher than sales price.)
So how does this affect you?As an example, if are selling a home in Vienna, and the sales price is $800,000 (with an assessed value of $760,000):  
  • Prior to July 1, you would pay $800.
  • If you settle and record on July 15, the tax would be $2,000!
As a result of this new tax, sellers should be aware that their closing costs will be higher than they may have previously remembered on past transactions.  
Expensive Home Sales Could  Trigger An Obamacare Tax
Starting in 2013, a complicated formula on high-end home sales adds an additional 3.8 percent tax to help fund Obamacare, potentially catching many home sellers by surprise. The health care bill does impose a 3.8% Medicare tax on high-income taxpayers who exceed a total household net-investment income -- a total which could conceivably include some of the proceeds from a home sale.
The tax affects singles with an adjusted gross income of at least $200,000 or couples with a joint income of $250,000 or more. When a home is sold, profits over the first $500,000 are subject to a capital gains tax, and starting in 2013, those profits also include an additional 3.8 percent tax that helps fund Obamacare. 
However, while this Medicare tax will be applied to households with an adjusted gross income of $200,000 or more for individuals, or $250,000 or more for married couples, it typically won't include capital gains resulting from the sale of a home, providing that home is a primary residence and not a vacation or rental home.Why? Because the capital gains tax exclusion rule for sales of a primary home -- $250,000 for individuals and $500,000 for couples -- will remain.
In other words, if the profit realized from the sale of the home falls below those capital gains exclusion totals, then it can't be tacked on to that household's net-investment income tally. Hence, that 3.8% Medicare tax would not apply.
If the gains from the sale of the house do exceed the $250,000 or $500,000 thresholds, they will be added to the household's net-income total, which is subject to that 3.8% Medicare tax. All told, however, that tax will fall on a relative few -- typically, households with large incomes from other sources. 
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