Death and the 3.8% Medicare investment income tax
When a home owner dies and their house, etc is revalued to the date-of-death values, it appears to me that the 3.8% Medicare investment income tax would not apply since any step-up in values would not be reportable capital gains. Is this view correct?
Permalink Submitted by mk foss on Sun, 2012-09-30 21:27
That is correct but I expect very few people to ever pay a 3.8% Medicare tax on the sale of a personal residence. It applies to a couple that sells the residence at a profit greater than $500k where that excess profit along with their other income exceeds $250K. They don’t get the $500K exclusion if they haven’t lived in the house for two of the last 5 years but with the way real estate prices have been, I don’t see a big profit under those circumstances.