Full List of Obama Tax Hikes

Full List of Obama Tax Hikes

As a brief reminder for those who forgot ….and for  many that didn’t know.
Here is what happened, quietly, on January 1, 2016:
Medicare tax went from 1.45% to 2.35%
Top Income tax bracket went from 35% to 39.6%
Top Income payroll tax went from 37.4% to 52.2%
Capital Gains tax went from 15% to 28%
Dividend tax went from 15% to 39.6%
Estate tax went from 0% to 55%
A 3.5% Real Estate transaction tax was added.
Remember these facts:
These taxes were all passed solely with Democrat votes. Not a single Republican voted for these new taxes. These taxes were all passed in the Affordable Care Act, aka Obamacare.

How ObamaCare Taxes Affect You: New Taxes, Hikes, Breaks, Credits, and Other Changes

Here’s a full list of ObamaCare Taxes. The 21 new ObamaCare tax hikes and breaks impact us all, but which ObamaCare taxes will you actually pay? Find out how the tax related provisions in the Affordable Care Act (ObamaCare) will affect you, your family, your business, and your tax returns for 2014 and beyond.

Need to file your ObamaCare taxes? Check out our page on how to file taxes under the Affordable Care Act. Everyone who is required to file taxes has to either report which months they had minimum essential coverage or make a Shared Responsibility Payment for each full month they didn’t have qualifying health insurance.

 

The Bottom Line on the ObamaCare Tax Plan

The new tax related provisions in the Affordable Care Act (ObamaCare) include tax hikes, limits to deductions, tax credits, tax breaks, and other changes. While a few of the changes directly affect the average American, tax increases primarily affect high earners (those making over $200,000 as an individual or $250,000 as a family), large businesses (those making over $250,000 and those with 50 or more full-time equivalents), and the health care industry. However, tax credits primarily affect low-to-middle income Americans and small businesses (those with less than 25 full-time equivalents, making less than $25,000 in average annual wages).

Here are some quick facts to help you understand how ObamaCare affects taxes:

• For the majority of the 85% of Americans with health insurance, the percentage of income paid in taxes won’t change much (if at all). However, some of the changes may directly or indirectly affect specific groups.

• The majority of the 15% of Americans without health insurance will primarily be affected by the Individual Mandate (the requirement to buy health insurance), the Employer Mandate (the requirement for large employers to insure full-time employees), and Tax Credits, (which reduce premium costs for individuals, families, and small businesses). In other words, the requirement to Get Covered, the expansion of employer based coverage, the fee for not having coverage, and cost assistance are the main tax related provisions that affect the average American.

• If you got a Tax Credit through the Marketplace, you’ll need to adjust and report your Tax Credit on your Federal Income Taxes. Please see our tax-filing page for details on adjusting taxes for Form 8962, Premium Tax Credit (PTC).

• Many Americans will be affected by changes to new limits on medical tax deduction thresholds for Medical Savings Accounts: MSAs, FSAs, and HSAs.

• Small businesses (with less than 50 full-time equivalents) will not be required to provide health insurance. Those with less than 25 full-time equivalents making less than $25,000 in average annual wages may be eligible for tax credits to reduce premium costs if they choose to offer employees coverage.

• Even if you won’t see higher taxes under the Affordable Care Act, it doesn’t mean there aren’t costs associated with the law. You’ll still need to buy health insurance unless you qualify for Medicaid or an exemption, and that will cost you money.

• As a rule of thumb, in regards to both health insurance costs and taxes under the Affordable Care Act, those who make less pay less, and those who make more pay more.

• The Congressional Budget Office has shown that, paired with cuts to spending, the revenue generated from the new taxes will help to pay for the Affordable Care Act’s many provisions, fund tax credits, and lower the deficit by 2023. Learn More.

ObamaCare includes many new benefits, rights, and protections including the requirement for health insurers to cover people with pre-existing conditions. It also expands access to affordable health insurance to almost 50 million low-to-middle income men, women, and children across the country by offering reduced premiums via tax credits and expanding Medicaid and CHIP. The ACA’s expansions of the quality, affordability, and availability of health insurance (along with other aspects of the law) come at a high cost. Assuming all tax provisions remain in place, the revenue generated by these new taxes helps to cover the costs of the program and reduce the deficit. Learn more about thenew benefits, rights, and protections offered by the Affordable Care Act.

A Quick Overview of Key Taxes in the Affordable Care Act

Before we get to the full list of taxes, here is a quick overview of the key tax-related provisions that may affect those without insurance, those who plan to go without insurance, and those who are struggling to afford insurance now.

Individual Mandate (new tax): Americans who can afford to obtain minimum essential health coverage must do so or get an exemption. If they do not, they will have to pay a per-month fee.

Employer Mandate (new tax): Starting in 2015, large employers with more than 50 full-time equivalents must insure full-time employees or pay a per-month fee for each of their full-time employees. Over half of Americans get their insurance through work, and the largest group of uninsured is currently the working poor.

Advanced Premium Tax Credits (tax break): Low-to-middle income Americans are eligible for tax credits, which reduce the upfront cost of premiums on health insurance purchased through their State’s “Health Insurance Marketplace”.

Small Business Tax Credits (tax break): Small businesses with less than 25 full-time equivalents may be eligible for tax credits of up to 50% of their cost of employee premiums through the Small Business Health Options Program.

Taking all the tax provisions in the ACA into account, ObamaCare technically provides the greatest middle-class healthcare tax cut in history.

Full List of All Taxes in ObamaCare / All Taxes in the Affordable Care Act

The following list of new ObamaCare taxes collectively raises over $800 billion by 2022. Here is a complete list of new fees and taxes contained within ObamaCare:

ObamaCare Taxes That Probably Will Not Directly Affect the Average American

• 2.3% Tax on Medical Device Manufacturers began in 2014

• 10% Tax on Indoor Tanning Services began in 2014

• Blue Cross/Blue Shield Tax Hike

• Excise Tax on Charitable Hospitals that fail to comply with the requirements of ObamaCare

• Tax on Brand Name Drugs

• Tax on Health Insurers

• $500,000 Annual Executive Compensation Limit for Health Insurance Executives

• Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D

• Employer Mandate on business with over 50 full-time equivalent employees to provide health insurance to full-time employees. $2,000 per employee – $3,000 if employee uses tax credits to buy insurance on the exchange (AKA the marketplace). (starting 2015 for employers with 100 or more FTE and 2016 for those with 50 or more.)

• Medicare Tax on Investment Income. 3.8% over $200k/$250k

• Medicare Part A Tax increase of .9% over $200k/$250k

• Employer Reporting of Insurance on W-2 (not a tax)

• Corporate 1099-MISC Information Reporting (repealed)

• Codification of the “economic substance doctrine” (not a tax)

ObamaCare Taxes That May Directly Affect the Average American

• 40% Excise Tax “Cadillac” on high-end Premium Health Insurance Plans 2018

• An annual $63 fee levied by ObamaCare on all plans (decreased each year until 2017 when pre-existing conditions are eliminated) to help pay for insurance companies covering the costs of high-risk pools.

• Medicine Cabinet Tax
Over the counter medicines no longer qualified as medical expenses for flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), health savings accounts (HSAs), and Archer Medical Saving accounts (MSAs).

• Additional Tax on HSA/MSA Distributions
Health savings account or an Archer medical savings account, penalties for spending money on non-qualified medical expenses. 10% to 20% in the case of a HSA and from 15% to 20% in the case of a MSA.

• Flexible Spending Account Cap began in 2013
Contributions to FSAs are reduced to $2,500 from $5,000.

• Medical Deduction Threshold tax increase began in 2013
Threshold to deduct medical expenses as an itemized deduction increases to 10% from 7.5%.

• Individual Mandate (the tax for not purchasing insurance if you can afford it). Starting in 2014, anyone not buying “qualifying” health insurance must pay an income tax surtax at a rate of 1% or $95 in 2014, to 2.5% in 2016 on profitable income above the tax threshold. The total penalty amount cannot exceed the national average of the annual premiums of a “bronze level” health insurance plan on ObamaCare exchanges.

• Premium Tax Credits for Small Businesses began in 2014 (not a tax)

• Advanced Premium Tax Credits for Individuals and Families began in 2014 (not a tax)

• Medical Loss Ratio (MLR): Premium rebates (not a tax)

NOTE: Tax amounts above are subject to increase over time.

The link below provides a full list of ObamaCare Taxes by the IRS.

For a full list of taxes provisions from the IRS.

Or see the latest publication by the joint tax committee on the Affordable Care Act.

Who Does ObamaCare Tax?

Let’s take a look at how ObamaCare’s taxes affect certain income groups.

ObamaCare Taxes for High Earners and Large Businesses

Most of the new taxes are on high-earners (individuals making over $200,000 and families making over $250,000), large businesses (over 50 full-time equivalent employees making over $250,000), and industries that profit from healthcare. Essentially, those who will see significant gains under ObamaCare are required to put money back into the program via taxes.

FACT: Tax increases generally affect single filers with an adjusted gross income (AGI) above $200,000 and married couples filing jointly above $250,000. Some of the tax increases don’t kick in until single AGI hits $400,000 and married filing jointly AGI hits $450,000.

ObamaCare Taxes for the Average American With Health insurance

For most of the 85% of Americans who have health insurance and make less than $250,000, most of the new taxes won’t change much. However, certain taxes below will affect specific individuals and families. Also the requirement to have coverage or pay a Shared Responsibility Payment applies to all Americans over the tax-filing threshold.

ObamaCare Taxes for the Average American Without Health insurance

The 15% (see current uninsured rate here) of Americans without health insurance will be required to obtain health insurance (Individual Mandate) or will face a “tax penalty”.

The good news is that many uninsured Americans will be exempt from the Individual mandate due to income, will be offered cost assistance through the marketplace via Tax Credits (also available to small businesses), will qualify for Medicaid, or will get insurance through work (the Employer Mandate requires large employers to insure full-time employees by 2015). Adults who are under 26 will be able to stay on their parents’ plan as well. This will help to limit the number of young people who will pay the fee. Both the employer and individual mandates are part of the “shared responsibility” to expand the quality and affordability of health insurance in the United States that we take on as a trade for ournew benefits, rights and protections.

ObamaCare Taxes for Small Businesses

Small businesses with fewer than 25 full-time equivalent employees who make less than $25,000 in average annual wages will have access to tax credits to reduce premium costs of group plans. We suggest that employers use the SHOP to get employee health plans.

ObamaCare Taxes for Specific Groups With Health Insurance

Here are a few changes that my affect specific groups of Americans with health insurance:

• Other tax provisions, such as changes medical deduction thresholds, HSAs, MSAs, and FSAs, may impact some Americans by limiting tax deductions.

• The Medical Loss Ratio (MLR or 80/20 rule) will mean that some Americans may get rebates if health insurance companies spend on non-healthcare related expenses.

• Tax provisions, like the 10% tanning bed tax, taxes on drug companies, taxes on medical devices, and taxes on health insurance companies selling insurance on and off the exchange may affect the amount of money that we pay for some health care related goods and services, but these provisions will not have a significant impact on our daily lives.

• The employer mandate has caused some companies to cut down workers’ hours from full-time to part-time in order to avoid providing benefits. However, major employers like Disney and Walmart have actually increased their full-time workforce in response to the 2015 deadline.

• Overall, the benefits tend to outweigh the costs for the average American. Even those who pay a little more get a lot in return via the increased quality of their health insurance.

Will I pay More Taxes and High Premiums Because of ObamaCare?

As mentioned above, premium rates and the taxes you will have to pay are primarily based on income. Apart from income, premium prices are based on which plan you choose, family size, age, smoking status, and geography. Subsidies reduce the overall rate of your premiums (however, smoking is factored in after subsidies). The plan for 2018 includes a 40% excise tax on the very high-end health insurance plans. Most of us don’t have those.

Aside from the tax provisions that require Americans to obtain insurance and those that subsidize its costs, ObamaCare also includes a few tax-related provisions, such as requirements for better reporting and the Medical Loss Ratio, which work as consumer protections.

ObamaCare Tax Rebates

Some consumers in both individual and group markets will see tax rebates due to ObamaCare’s Medical Loss Ratio (MLR). Health insurance companies will have to provide rebates to consumers if they spend less than 80 – 85% of premium dollars on medical care.

Medical Loss Ratio (MLR)

The Medical Loss Ratio (MLR) means that Insurance companies are now required to spend at least 80% of premium dollars (85% in large group markets) on medical care and quality improvement activities. Insurance companies that are not meeting this standard will be required to provide rebates to their consumers. The MLR isn’t a tax, but it does have implications in regards to filing taxes, and rebates can be given in the form of reduced premiums. See our page on ObamaCare Health Insurance Regulations for more details.

ObamaCare Income Tax Penalty For Not Having Insurance “Individual Mandate”

The Individual Mandate is officially called the “Individual Shared Responsibility Provision”. It says that, starting in 2014, most people had to have insurance or pay a “penalty deducted from your taxable income” called an “Individual Shared Responsibility Fee“.

The annual fee for not having insurance in 2014 was $95 per adult and $47.50 per child (up to $285 for a family) or 1% of your household income above the tax return filing threshold for your filing status – whichever amount is greater.  You paid 1/12 of the total fee for each full month in which at least one family member went without having either coverage or an exemption.

The annual fee for not having insurance in 2015 is $325 per adult and$162.50 per child (up to $975 for a family) or 2% of your household income above the tax return filing threshold for your filing status – whichever is greater. You’ll pay 1/12 of the total fee for each full month in which at least one family member went without having either coverage or an exemption.

  • The fee cannot exceed the cost of a “bronze plan” bought on the exchange.
  • The requirement can be waived for several reasons. These include financial hardship or religious beliefs.
  • The 8% rule: If the cheapest marketplace plan would exceed 8% of your household income, you qualify for an exemption from the fee. See a full list of exemptions, how to apply for them, and how they work.
  • Many individuals who are exempt from the mandate to buy insurance will still be eligible for free or low-cost insurance through the health insurance marketplace.
  • While some states, including Alabama, Wyoming, and Montana, have passed laws to block the requirement to carry health insurance, those provisions do not override federal law. Get more information on the ObamaCare Individual Mandate.

What Are ObamaCare Tax Credits?: Advanced Premium Tax Credits

Premium Tax Credits are a form of cost assistance that reduce premium costs for coverage purchased on your state’s Health Insurance Marketplace for individuals, families, and small businesses.

Advanced Premium Tax Credits for Individuals and Families

Individuals and families will have access to advanced premium tax credits on the marketplace. Tax Credits are deducted from your premium cost by your health insurance provider and are adjusted on your Modified Adjusted Gross Income (MAGI). You can choose how much ( up to a maximum amount) in advance credit payments to apply to your premiums each month. If the amount of advance credit payments you get for the year is less than the tax credit you’re due, you’ll get the difference as a refundable credit when you file your federal income tax return. If your advance payments for the year are more than the amount of your credit, you must repay the excess advance payments with your tax return.

Aside from premium tax credits, individuals and families can also get lower cost sharing on out-of-pocket expenses (coinsurance, copays, deductibles, and out-of-pocket maximums) through the marketplace.

Eligibility for Tax Credits

In general, you may be eligible for the credit if you meet all of the following:

  • buy health insurance through the Marketplace;
  • are ineligible for coverage through an employer or government plan;
  • are within certain income limits;
  • file a joint return (if married); and
  • cannot be claimed as a dependent by another person.

If you are eligible for the credit, you can choose to:

  • Get It Now: have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014; or
  • Get It Later: wait to get all of the credit when you file your 2014 tax return in 2015.

How Will Advanced Premium Tax Credits Affect My Health Insurance Costs?

Under the Affordable Care Act, health insurance that costs less than 8% of your MAGI is considered affordable. Although the law doesn’t guarantee lower costs, premium tax credits help to ensure that more Americans will have access to affordable insurance.

As a rule of thumb, most Americans will pay between 1.5% and 9.5% on their Modified Adjusted Gross Income (MAGI) when using tax credits to buy a basic Silver Plan on the marketplace.

You are exempt from the individual mandate if the lowest-priced coverage available to you would cost more than 8% of your household income.

The amount you pay is determined by a sliding scale based on your income. Use the chart below to get an idea of what you and your family may pay for insurance purchased through the Health Insurance Marketplace. Make sure to check out ObamaCare Subsidies for more detailed information on Premium Tax Credits.

Simplified 2015 FPL Guidelines you’ll use for 2016 cost assistance, 2015 Medicaid and CHIP, and taxes filed April 15, 2017. See all Federal Poverty Guidelines here.

Persons in household 2015 Federal
Poverty Level threshold
100% FPL
 NOTE: If your family size was more than 8 people, add $4,160 for each additional person. Hawaii and Alaska use different guidelines.
1 $11,770
2 15,930
3 20,090
4 24,250
5 28,410
6 32,570
7 36,730
8 40,890

This following table is an example of how premium tax credits work. Please note that the numbers below are purely for example and don’t reflect your personal rates.

Health Insurance Premiums and Cost Sharing under PPACA for Average Family of 4
For “Silver Plan” in 2015
Income % of federal poverty level Premium Cap as a Share of Income Income $ (family of 4) Max Annual Out-of-Pocket Premium Premium Savings Additional Cost-Sharing Subsidy
133% 3% of income $31,900 $992 $10,345 $5,040
150% 4% of income $33,075 $1,323 $9,918 $5,040
200% 6.3% of income $44,100 $2,778 $8,366 $4,000
250% 8.05% of income $55,125 $4,438 $6,597 $1,930
300% 9.5% of income $66,150 $6,284 $4,628 $1,480
350% 9.5% of income $77,175 $7,332 $3,512 $1,480
400% 9.5% of income $88,200 $8,379 $2,395 $1,480
In 2016, the FPL will be 11,770 for a single person and about $24,250 for family of four. Use the Kaiser ObamaCare Cost Calculator for more information. DHHS and CBO estimate the average annual premium cost in 2014 to be $11,328 for family of 4 without the reform. Source: Wikipedia

ObamaCare Employer / Employee Taxes

ObamaCare’s taxes mean that large employers will have to provide health insurance to their employees and will see a raised Medicare part A tax. Small businesses may be eligible for tax breaks.

Medicare part A Tax Hike for Employers and Employees

The Medicare part A tax is paid by both employees and employers who earn over a certain amount. ObamaCare’s Medicare tax hike represents a .9% increase (from 2.9% to 3.8%) on the current total Medicare part A tax. This tax is split between the employer and employee, thus each will see a .45% raise.  Small businesses making under $250,000 are exempt from the tax. Employees making less than $200,000 as an individual or ($250,000) as a family are also exempt. Employers must withhold and report an additional 0.9% total on employee wages or compensations that exceed $200,000.

Tax Penalty for Not Providing Full-time Workers with Health Insurance the “Employer Mandate”

Employers with over 50 full-time equivalent employees must either insure their full-time employees or pay a penalty (the “employer shared responsibility fee”). The penalty is $2000 per employee. If, however, at least one full-time employee receives a premium tax credit because coverage is either unaffordable or does not cover 60 percent of total costs, the employer must pay the lesser of $3,000 for each of those employees receiving a credit or $750 for each of their full-time employees total.

Employers with fewer than 25 full-time employees whose average income doesn’t exceed $50,000 can apply for tax credits of up to 50% for insuring their employees.

Tax Credits for Small Businesses

If small businesses have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000, they can apply for tax breaks of up to 50% of their share of employee premium costs via ObamaCare’s Small Business Health Options Program (accessible through your State’s Health Insurance Marketplace). The credit can be as much as 50% of employer premiums (the rate was 35% for not-for-profits in 2014). The credit is only available if the employer is paying at least 50% of the total premiums.

Small Business Health Options Program

Employers with 50 or fewer employees can purchase affordable insurance through the Small Business Health Options Program (SHOP) even if they don’t qualify for tax credits.

Reporting

Along with the new law, there are new requirements for reporting.

    • Effective for calendar year 2015, you must file an annual return reporting whether and what health insurance you offered your employees. This rule was optional for 2014. Learn more.
    • Effective for calendar year 2015, if you provided self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover. This rule was optional for 2014. Learn more.
    • Beginning Jan. 1, 2013, employers had to withhold and report an additional 0.9 percent on employee wages or compensation that exceed $200,000. Learn more.

Other ObamaCare Taxes on Big Business

In addition to making people adhere to the “employer mandate,” ObamaCare also imposes taxes and fees that are unique to big business. ObamaCare taxes some medical device manufactures, drug companies, and health insurance companies. Beginning in 2013, medical device manufacturers and importers had to pay a 2.3% tax on the sale of a taxable medical device. This was expected to raise $29 billion over 10 years. However, many states are asking to delay the medical device excise tax to protect jobs in states that produce the devices. An annual fee for health insurers is expected to raise more than $100 billion over 10 years while a fee for brand name drugs will bring in another $34 billion.

  • Employers that have employees who earn more than $200,000 will have to look at the potential for additional Medicare withholding due to the Medicare part A tax.
  • Employers that issued 250 or more W-2 forms in 2012 were required to report the cost of employer-sponsored health coverage beginning in 2013 on the 2013 W-2 forms.

Medical Device Excise Tax

There is a 2.3% medical excise tax on medical device manufacturers and importers on the sale of taxable medical devices. Section 4191 of the Internal Revenue Code imposes an excise tax on the sale of certain medical devices by the manufacturer or importer of the device. This tax applied to sales of taxable medical devices after Dec. 31, 2012. You can learn more from the official IRS page on the Medical Device Tax.

What Increases Do the ObamaCare Taxes Include for The $200k/$250k Earners?

ObamaCare Medicare Part A Payroll Tax

Starting in 2013, individuals with earnings above $200,000 and married couples making more than $250,000 saw an increase in the Medicare part A payroll tax. It’s an increase of 2.35%, up from 1.45% ( a .9% Medicare part A payroll tax hike), on adjusted income over the threshold.

ObamaCare Unearned Income Tax

This group will also pay a 3.8% unearned income (capital gains) tax on interest, dividends, annuities, royalties, rents, and gains on the sale of investments over the threshold.

Taxable income under the $200,000 for individuals and $250,000 threshold for families is subject to the same benefits and tax cuts as those who earn under the threshold.

ObamaCare Home Sales Tax / ObamaCare Real Estate Tax Increase

ObamaCare increases taxes on unearned income by 3.8%, and this can add additional taxes to the sales of some homes. However, many limitations apply, so this won’t affect most sellers. The 3.8% capital gains tax typically doesn’t apply to your primary residence. It also doesn’t usually apply to homes you have owned for over 5 years or on profits of less than $250,000 for individuals and $500,000 for couples due to a capital gains tax exclusion rule for sales of a primary home.

In short, the ObamaCare home sales tax isn’t something that most of us will pay – it is a tax aimed toward those selling non-primary residences in short term periods for profit, and has no impact on the average American buying and selling their primary residence.

ObamaCare Medical Expense Deductions

ObamaCare increases the medical expense deduction threshold. Unreimbursed medical expense deductions will now be available only for those medical expenses in excess of 10% of AGI, which has been raised from 7.5%. During the period between 2013 and 2016, there is a temporary exemption for individuals ages 65 and older and their spouses.

ObamaCare “Cadillac” Tax

Starting in 2018, the new health care law imposes a 40% excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceed $10,200 a year and $27,500 for families. The tax has been dubbed a “Cadillac” tax because it hits only high-end “gold”, “platinum”, and high-end health care plans not purchased on the exchange. The tax raises over $150 billion over the next 10 years.

New ObamaCare Taxes Summary

Going through the new ObamaCare taxes line by line is, in itself, taxing. The ultimate outcome is that, while higher-earners will pay tax rates closer to what they did in the Clinton years, the majority of Americans will find themselves paying less for better healthcare. ObamaCare, in addition to cutting out billions in wasteful spending, pays for most of its regulations by the above taxes and reforms to both Medicare and health care as a whole.

ObamaCare Taxes Moving Forward

We hope this helps you to understand the new ObamaCare taxes and how they work. Many of ObamaCare’s taxes won’t be fully implemented until 2022, but were in full effect as of January 1st, 2014. ObamaCare helps all Americans get access to high-quality, affordable healthcare as well as new benefits, rights, and protections. Make sure to look out for ObamaCare tax breaks, credits, subsidies, and breaks on up front costs moving forward into 2016. We will update our full ObamaCare tax list as we learn more .

 
Why Does ObamaCare Create New Taxes?

 

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THESE ARE SOME HOUSES YOU NEED TO BUY AFTER YOU WIN THE LOTTERY

THESE ARE SOME HOUSES YOU NEED TO BUY AFTER YOU WIN THE LOTTERY

 

There’s a ton of advice out there that means to guide you toward the best ways to handle your money if (when!) you win the record lottery. But, come on. We all know what you’re going to do with your winnings: run right out and buy the most amazing house you can find. (Incidentally, it’s the same thing we’re going to do!)

Need some assistance picking out that perfect palace? We can help!

A family compound/party playground

Go ahead and drop $69 million on a sick compound where you can swim, boat, ski, and gamble (be careful with that one, though) with 12 dozen members of your family and all your new friends.

This historic 130-acre Lake Tahoe ranch, named Shakespeare Ranch, offers more than 200 feet of lake frontage on Lake Tahoe, and “nearly 35,000 square feet of improvements including a historic entertainment barn built in 1873 with chef’s kitchen and plans for a new approximately 9,500 square foot estate home with garage,” said the listing. Plus seven guest homes and cabins. The annual “Glenbrook Rodeo” is held here, “featuring bull riding, bronco riding, ribbon roping, and barrel racing. In addition to the rodeo, there are carnival games and a silent auction followed by an extraordinary dinner prepared by restaurateur Emeril Lagasse at the Barn,” said Sotheby’s. “The evening also features a top-notch private performance by a surprise A-list entertainer. Past headliners have included Robin Williams, Jay Leno, Lionel Richie, Kenny ‘Babyface’ Edmonds, Kenny Loggins and the band America.


Sotheby’sA Zen Den

With all that zooming around in your new Lamborghini, lunching at the most exclusive spots, and jetting all over the world, you’re going to need a place to just Zen out. Where better to do that than in this incredible Sedona home?

This 5,676-square-foot luxury contemporary has “nearly 360-degree spellbinding panoramic red rock views and floor to ceiling glass walls and doors,” said Sotheby’s. The home is one of 30 private estates in the exclusive, guard-gated Seven Canyons Golf Resort. It’s priced at $4,740,000.


Sotheby’sA Parisian Pied-a-Tierre (or Palace)

A two-story luxurious penthouse in the heart of Paris that boasts awe-inspiring views of the Seine and Eiffel tower? But of course! This ultra glam, ultra luxe place has a gilded dining room that seats 24, more marble than you’d find at a quarry, and it can be yours for just $65,416,500. Come on, you can afford it.


Pricey PadsA swanky NYC pad with a view

If you could manifest the perfect NYC view, it would look a lot like this. You’re forgiven if you NEVER GET OUT OF THAT BATH.

This stunning 5,256-square foot, 5-bedroom, 5.5-bath SoHo duplex with 808 square feet of private outdoor space overlooks Downtown and Uptown, and the interior is just as sparkly, with a private elevator vestibule, a formal central gallery, a double-height great room, and a gourmet kitchen.


Douglas EllimanA Silicon Valley Stunner

Looking to become a tech insider with your lottery winnings? You’ll need an outrageous Silicon Valley manse. In swanky Atherton—once named the most expensive zip code in the country and home (or former home) to Paul Allen, Eric Schmidt, Meg Whitman, and Sheryl Sandberg, you won’t find a bargain, but you may just find a new tech billionaire bestie.

You’ve got plenty of options in the $9 million and up range, but we’ll take this lavish 9,600-square-foot custom estate on two flat acres that also advertises its “prime location to Google, Facebook and Stanford.”


Point2HomesAn Historic Architectural

Always dreamed of owning a Frank Gehry or Frank Lloyd Wright architectural home? How about one of each? The Schnabel House in L.A.’s Brentwood neighborhood is on the market for $9,995,000.

“Noted as one of the 20 greatest houses of the 20th century, this California architectural piece of history has been lovingly remastered as a livable piece of art for generations to come,” said Elliman.


iDesignArchThis 2,800-square-foot, Frank Lloyd Wright prairie-style home known as the J. Kibben Ingalls House is on a desirable, leafy street in River Forest, IL, a Chicago suburb, and is listed for $1,325,000. At that price, you can use the original details including sconces, art glass windows, and built-in cabinetry as inspiration to restore the rest of the home to Wright’s original standards.

Island Dreams

Or, forget the house and buy a private island that features Two Frank Lloyd Wright homes – a Wright-designed 1,200-square-foot cottage, and a 5,000-square-foot main residence that was “built in 2008 from one of Wright’s final plans, and is considered by some to be one of the most spectacular designs of his career,” said Private Islands Online. “Boasting 1,500 square feet of skylights and vast expanses of stone, cement, and mahogany, the main residence is truly a triumph of modern architecture.”

The 11-acre Petra Island is located on the private Lake Mahopac 50 miles north of New York City (or “15 minutes by helicopter,” as the home’s listing delightfully points out) and also offers its own helicopter landing pad.


Private Islands Online
A Celeb Lair

Don’t just live like a celebrity. Live in a celebrity home. Have a secret crush on Jennifer Lopez? You can buy the Long Island home she shared with former husband Marc Anthony for under $10 million after a $2.5 million(!) price reduction.


Dolly LenzWritten by Jaymi Naciri

10 Disciplines to Build Wealth

The disciplines are as follows:

  1. Have a mature understanding of wealth and prosperity – because the one with the most toys usually loses
  2. Be in the top 10 percent of your profession – because being good is not good enough
  3. Live below your means and be ready for the next recession – because downturns are a regular part of our economic cycles
  4. Minimize debt – because it is the biggest enemy to wealth
  5. Invest at least 20 percent of your income in real estate and stocks – because they are the best and safest ways to build wealth.
  6. Know your net worth including the value of your business – because you cant improve what you don’t measure.
  7. Be politically savvy – because public policy matters.
  8. Be physically fit – because wealth without health is meaningless.
  9. Be generous with people who are less fortunate – because philanthropy feeds your heart and spirit and gives more purpose to your work.
  10. Be active in the lives of your family and children – because family is central to who we are.

CAPITAL GAINS: THE STEPPED UP BASIS

CAPITAL GAINS: THE STEPPED UP BASIS

If you are married, and file a joint income tax return, the tax laws allow you to exclude up to $500,000 on any gain you make on the sale of your principal residence. There are some basic rules (conditions) which must be met, the most important is that you must have owned and lived in the house for two out of the last five years before the sale. This is referred to as the “ownership and use” test.

If you are single — or widowed — you can only exclude up to $250,000 of your profit.

At first blush, this seems unfair — especially to a person who has lived in their principal house for many years and then the spouse dies. There are, however, two tax breaks available.

First, according to the IRS, “if you sell your home after your spouse dies (within 2 years after your spouse dies), and you have not remarried as of the sale date, you can count any time when your spouse owned the home as time you owned it, and any time when the home was your spouse’s residence as time when it was your residence.” (IRS Publication 523, Selling Your Home). In other words, the surviving spouse can claim the up-to-$500,000 exclusion of gain if the house is sold within two years from the date of death, and it is not necessary to file a joint tax return.

Let’s assume for this discussion that the couple purchased their home many years ago for $50,000, and when the husband died, it was worth $750,000. Let’s further assume no capital improvements which would have increased the tax basis. In our example, if within two years from death, the spouse sells for $750,000, the gain is $700,000. The spouse can exclude $500,000 of the gain. But $200,000 of gain still has to be accounted for.

Then we go to the second tax break: called “Stepped Up Basis“.

Basically, the value of the house on the date of death becomes the basis of the person who inherits from the deceased. In effect, the basis is “stepped up”.

Let’s go back to our example. The basis of the surviving spouse in the house is $25,000 (half of the purchase price). When one spouse died, the survivor inherited his/her basis as of the date of death, which was $375,000 (half of $750,000). Thus, for tax purposes, the surviving spouse’s basis is now $400,000 (the original $25,000 basis plus the inherited basis of $375,000).

If we continue to do the math, when the house is sold for $750,000, the capital gain — i.e., profit — is only $350,000 ($750,000 – 400,000). If the house is sold within two years from the day the spouse died, the surviving spouse can exclude all of the gain and pay no tax.

However, if the house is sold after the two years, the gain is $100,000 more than the $250,000 ceiling authorized by Congress, and the survivor will have to pay capital gains tax on the $100,000. Clearly, while the IRS will get some money, the stepped-up basis does reduce the pain.

Since the gain is over $250,000, it is important to include all capital improvements which the owners made to the house over the many years. Any such improvements are additions to basis, and thus would reduce the profit. Hopefully, in this situation, it can be reduced sufficiently so that the gain falls under the $250,000 cap.

Before you consider selling, you must review your specific situation with your tax advisors. Clearly you don’t want to make any mistakes with your valuable equity.

Benny L. Kass