There has been some confusion about a provision in the recently passed health care reform bill that creates a 3.8 percent Medicare tax on unearned income for high-income households. A recent newspaper article in the Spokane, Wash.-based Spokesman-Review made its way around the Internet defining the new tax as a “tax on home sales.” The article did not present a full and detailed explanation of the specifics of the new provision and what it does and does not do.

The new Medicare tax is for all unearned net investment income and includes interest income, dividends, rents, and capital gains. The new Medicare tax will not impact the capital gains exclusion for principal residences ($250,000 for individuals/$500,000 for married couples). The 3.8 percent tax only will apply to taxable gains above this exclusion. The tax will take effect on Jan. 1, 2013, and will be applicable to high-income taxpayers with adjusted gross incomes of $200,000 or more for individuals, or $250,000 or more for married couples.

Additional information is available at http://www.realtor.org/small_business_health_coverage.nsf/Pages/health_ref_faq_med_tax?OpenDocument.