The New PPCA Act Explained
The PPCA Act Explained: PPCA creates new code section 1441 imposes 3.8 percent tax on net investment income over a threshold amount.
There has been much news circulating around a new tax called The Patient Protection and Affordable Care Act (PPCA) which imposes a 3.8% sales tax on all real estate transactions. Now, there is much confusion regarding the bill, and the attorneys of Nancy Carroll, PC will explain this act to you fully.
The first thing to understand is that this new tax will only affect a very small percentage of the population. One of the circulating theories is that this sales tax is being reported to be the same as the Medicare tax. It must be said, though, that the Medicare tax is not the same as the sales tax. Though the bill will affect a very small population of real state owners, the bill does not in any way indicate that all real estate transactions are subject to a 3.8% sales tax.
Before fully forming an opinion about newly implemented law, it’s important to understand first the provisions of the law. First, only those with an income of $200,000 a year for individuals and $250,000 combined income for married couples are eligible for the sales tax. ($200,000 individuals, $250,000 married filing joint return, or $125,000 married filing separate returns)
This bill will affect the high-income citizens more than anything. Second, they are only subjected to the 3.8% sales tax if and only if the profits from the sale of a personal residence exceed the amounts specified in the bill. Meaning, the first $250,000 in profit in the sale of a personal residence—in the case of a married couple, $500,000—is excluded from taxable income. This means that if a personal residence is sold for less than $250,000, it is not subjected to the 3.8% sales tax. Even if the individual who sold the resident has an income of more than $200,000, the sales tax will still not affect the profit.
For an estate or trust, the tax is 3.8% of the lesser of undistributed net investment income or the excess of AGI over the dollar amount at which the highest income tax bracket applies. For net investment income it includes gross income from interest, dividends, royalties, rents, and net capital gains and for an estate or trust, the tax is 3.8% of the lesser of undistributed net investment income or the excess of AGI over the dollar amount at which the highest income tax bracket applies. Gross income from interest, dividends, royalties, rents, and net capital gains are included in net investment income while interest on tax-exempt bonds, veterans’ benefits, excluded gain from the sale of a principle residence, distributions from retirement plans, or amounts subject to self-employment taxes does not included in investment income.
Another important thing to note is that it’s still possible to be exempt from the sales tax despite the income and profit qualifying in the statements above. The seller must have used the house as his “main home” and have owned it for two out of the five years.
The tax is set to be implemented on December 31, 2012.
This blog post is sponsored by Nancy Carroll, P.C. – www.TxTitleAttorney.com.
The attorneys and staff at Nancy Carroll, P.C. have successfully negotiated hundreds of cases including short sales negotiations, foreclosures, receiverships to stop foreclosures, homeowners’ rights, and more.
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817-310-0136 – Title 817-732-1515 – Law
The Finance Commission of Texas Adopts New Rules Regarding Payoff Statements
The Commission recently reached a decision regarding the rules associated with insurance and lending companies providing payoff information. These decisions were reached based on recent objections from Texas mortgage industry leaders.
A meeting was held where stakeholders provided their thoughts on the payoff statement regulations. They voiced how the new set of rules can be improved, for instance that the “loan type” item should be removed from the form to avoid confusion for people who are not familiar with the industry. While this line item wasn’t removed from the form completely, a compromise was reached where “loan type” is now optional.
Other concerns also resulted in adaptations to the new regulations. For instance “One commenter suggested the form indicate that the form must be sent to the mortgage servicer’s designated address and appropriate contact person for requesting payoff statement information, if either is so designated. Another commenter suggested this include e-mail addresses. The Commission accepted these comments and incorporated the suggested changes into the new rule.”
Or in this instance where, “One commenter suggested the form include a notice stating that the statute provides mortgage servicers with at least seven business days after the date the payoff statement is received to provide the payoff statement to the requesting title company. To enhance clarity and ease transition to requirements under the new rule, the Commission accepted this comment and has modified the form to include a notice of the time requirement prescribed by the new rule.” [Source]
The standard payoff statement form is what mortgage services must use when issuing the official payoff statement to a title company’s request for a home loan. The terms of this agreement also include the number of days a mortgage service official must deliver this statement.
Generally, the Payoff Statement Form includes the name of the mortgage holders, the physical address of the loan’s underlying collateral, and the proposed closing date of the loan. The form also asks for such things as the payoff amount and sufficient information about the loan. Other information such as the adjustable rate mortgage information is only needed when applicable.
It’s pretty hard to digest but it’s important to understand all the underlying significance of the adopted rules for the payoff statements and how everyone has been affected.
The new rules have been effective since January 8, 2012.
Short Sale Tips for Buyer and Listing Agents
To increase your likelihood of success, always determine the following before making a short sale offer or listing a short sale.
1) is the current mortgage VA or FHA guaranteed; and
2) if not a VA or FHA guaranteed mortgage; then always determine if the loan is structured as an 80/20 with two mortgages and no PMI (Private Mortgage Insurance).
VA, FHA and non-PMI loans have a much higher rate of short sale negotiating success if you understand the guarantee process and what the lenders/investors are looking to accomplish behind the scenes.
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