by Clifford A. Hockley
As we begin 2012, all real estate investors need to pay very close attention to the ever changing tax landscape. Particular attention needs to be paid to the significant tax increases slated to occur in 2013.
Investors considering whether or not to sell and pay their taxes, or sell and 1031 Exchange, must consider the year-over-year tax implications. Real estate investors will have a much greater tax burden in 2013 than in 2012.
Tax Rate Changes for
2012 and 2013 |
| | 2012 | 2013 |
| Ordinary income | 35% | 39.6% |
| Qualified Dividends | 15% | 39.6% |
| Capital Gains Tax | 15% | 20% |
| State of Oregon | 9.9% | 9.9% |
| Courtesy of Delap CPA, Lake Oswego, Oregon |
Medicare Tax
Beginning January 1, 2013 a new Medicare tax of 3.8% will be applied to investment income of those investors with a modified adjusted gross income of over $200,000 ($250,000 for couples filing jointly). The tax applies to the lesser of the (1) total investment income for the year, and (2) the amount by which the individual’s total income exceeds the threshold. For example a single individual taxpayer who has $150,000 of investment income and $125,000 of other income will pay the new Medicare tax on $75,000(the amount by which the individuals’ income exceeds the $200,000 threshold. Because the threshold amounts for the new Medicare tax are not indexed for inflation, more taxpayers will be subject to the new Medicare Tax over time.
(courtesy of Jenee” Hilliard ,Attorney at Law , Miller Nash)
| Gifting | 2012 | 2013 |
| Lifetime Gift exemption | $5 Million | $1 Million |
| Top Federal Estate Tax Rate | 35% | 55% |
| Annual Gift exclusion | $13,000 | $13,000 |
| Courtesy Delap CPA, Lake Oswego, Oregon |
More details for those investors that have employees on-site at their properties:
1. Minimum Wages have increased in Oregon and Washington:
As of 1 January 2012 the Minimum wage has increased to:
~ Oregon to $8.80 an Hour
~ Washington $9.04 an Hour
Note: Continued uncertainty regarding social security taxes: Even though the President and Congress have extended the social security tax reductions for 2 more months there is no guarantee that they will be continued through next year 2012. Under the compromise late in 2010 that extended the tax cuts by President George W. Bush, employees in 2011 are paying Social Security at a reduced rate of 4.2 percent. President Obama would like to lower the 2012 Social Security tax rate for both employers and employees to 3.1 percent. But if Congress does not take action in two months, the Social Security tax rate in 2012 reverts to the usual 6.2 percent for both employers and employees.
See: Taxes are going up … no matter what party you support
Published: February 7, 2012
Use of this article without permission is a violation of federal copyright laws.
 Clifford A. Hockley is the President of Bluestone & Hockley Real Estate Services, one of the larger brokerage and property management companies in Portland, Oregon.
Mr. Hockley holds an MBA Willamette University and a B.S. in Political Science from Claremont McKenna College. He is a Certified Property Manager and Bluestone & Hockley Real Estate Services is an Accredited Management Organization (AMO) by the Institute of Real Estate Management (IREM). Mr.Hockley serves as member at large on the Portland IREM board. He has twice been named Certified Property Manager of the Year (2001 and 2003) by the Institute of Real Estate Management and is a frequent contributor to industry newsletters. |
