The 3.8% Tax in 2013…

THE 3.8% TAX

We’ve had a number of Sellers asking questions about the 3.8% tax on real estate that begins next year.  Don’t panic!  Starting in 2013, it’s true; there is a 3.8% federal tax that goes into effect to help pay for the Health Reform Act.  The 3.8% tax applies to investment income realized as a gain.  The inkling of truth is that the sale of real estate recognized as a gain on the net sales proceeds is not exempt.  Thus, real estate and other forms of investment income may be subject to the 3.8% tax beginning in 2013.

The tax does not apply to everyone.   However, if all or a portion of your income is derived from the profits earn from real estate and your income exceeds $200,000, than you may be paying an additional 3.8% tax on your income above $200,000.

The National Association of Realtors (NAR) has done an excellent job of taking this tax measure apart and breaking it down into layman’s terms.    Please feel free to download 3.8% TAX on Real Estate.  Perhaps as a result, you will sleep better tonight.

LONG TERM RENTALS IN DEMAND

The long term rental market on Maui has tightened up over the last year.  As a result we’ve noticed rent rates are increasing.  We’ve had several requests from Maui Realtors, new professionals and other individuals about the possibility of renting one of our Maui existing properties currently listed for sale.  Many potential renters have requested to be kept in the know about any rentals coming available.    We recently sold a newer 3 bedroom, 2.5 bath home situated along the golf course in the Pukalani, Upcountry Maui.  This home 1,900 sq. ft. home on a 10,000 sq.ft. parcel rented within a week of listing it on Craig’s List and above the asking rent.

The demand for long term rentals has risen as a result of the fallout of short sales, foreclosures, but also from sectors of the market who:  1) either feel the Maui real estate values will fall further;  2) those who would like to purchase a home but cannot due to income or lending constraints; 3) new residents to our island who wish to rent for 6 months to a year prior and obtain a better sense of  Maui prior to committing to a home purchase.   Add all these together and it puts a demand on the long term rental market.  We are not specialists in the long term rental market and refer our clients to our Island Sotheby’s Rental Department.  However based on our pulse of the market, we sense that rents on Maui have inched up by 10% conservatively in 2011.  Rental agents in the business feel the rental market has stabilized and demand varies depending on the quality of the home or condo.  We’ll keep you posted as time goes on.