Real Estate Investors Likely to Face New Tax Bite

By bcchrisc • November 8th, 2012

Some Investors Likely to Face New Tax Bite

Those Dabbling in Real Estate Could See Surtax on Rental Income Starting Jan. 1; Just Who Qualifies Is in Question


The presidential election could determine whether the wealthiest Americans will see their income taxes rise or fall. But there is one tax increase that is likely to occur no matter who wins office: an investment surtax that begins on New Year’s Day and will hit thousands of real-estate investors.

The tax won’t affect real-estate companies or those who work full-time managing their real-estate portfolio. But so-called passive investors—those who dabble in real estate part-time but have other jobs—could be subject to a 3.8% surtax on rental income from the properties.

The tax, which was included in the Affordable Healthcare Act passed by Congress in 2010, is intended to raise funds to pay for the law. It covers all types of investment income, not just real-estate income. But the rules regarding real-estate investors, including guidelines that determine who is and isn’t a passive investor, remain in contention. And that is causing confusion and anxiety.

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For ideas and strategies on how to deal with this change in the law please call or email Christopher Campagna at  703-549-1695  x1  or


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