Seems that there is a whole new tax topic going around the internet. The "obamacare" initiative has a largely unnoticed tax that is upsetting the right wingers no end. There is an unadvertised detail written into the health care package.
If you sell your house for more than you have paid for it, then you have gotten an unearned income. That is to be taxed at the rate of 3.8%. So if you sell your house for $100K more than you have invested you'd be pretty pleased even if you had to pay $3800 tax on the profit you had made (not earned). You are still $96,200 to the good. If you had made money in the market it would be counted as capital gain to be assessed at the taxable rate of 15%. Flipping the house is a way better deal for the taxpayer. Nonetheless there is a hue and cry going up about this. The conservatives are messing their britches about the sneaky, underhanded, communist, lying, thieving, Obama, plot to destroy the nation as we know it.
Just thought you'd want to know..
Quote from: Icarus on July 16, 2012, 03:30:35 AM
Seems that there is a whole new tax topic going around the internet. The "obamacare" initiative has a largely unnoticed tax that is upsetting the right wingers no end. There is an unadvertised detail written into the health care package.
If you sell your house for more than you have paid for it, then you have gotten an unearned income. That is to be taxed at the rate of 3.8%. So if you sell your house for $100K more than you have invested you'd be pretty pleased even if you had to pay $3800 tax on the profit you had made (not earned). You are still $96,200 to the good. If you had made money in the market it would be counted as capital gain to be assessed at the taxable rate of 15%. Flipping the house is a way better deal for the taxpayer. Nonetheless there is a hue and cry going up about this. The conservatives are messing their britches about the sneaky, underhanded, communist, lying, thieving, Obama, plot to destroy the nation as we know it.
Just thought you'd want to know..
I'm not saying that I'm opposed to the tax, but I do kind of question the "unearned" part of it. Since living in our house, we have repainted, landscaped, installed hardwood floors, installed closet organizers, updated several of the appliances, et cetera. If we sell it for more than we bought it for, I like to think that it's because our efforts have made it worth more.
I think there's something similar that already exists in Canada - as far as I know, if you flip a house that's not your primary residence, it's taxed business income. If it is your primary residence, I think it depends on how long you live in it (I think you have to live in the house for a minimum of a year for it to not count as "flipping" for business purposes). House flipping is pretty uncommon here for that reason. You see a lot more people buying property to convert into rental units.
My first instinct is to agree that taxing people for the slow accumulation of value that a well-cared for home will get over the years seem a bit unfair.
What Ali said. I don't know how the tax works here for 'flipping' (not a word we use in English.)
Quote from: OldGit on July 16, 2012, 06:32:01 PM
What Ali said. I don't know how the tax works here for 'flipping' (not a word we use in English.)
In broad terms, gains on disposals of private residences are exempt from tax in the UK. Depending on how wealthy you are and how efficient your tax planning is, part or all of the value of your house might be taxed on your death at 40%, but this does not affect the vast majority of the population. Imposing a tax on such gains would have the effect of impeding labour mobility, bearing in mind that there is a already a transfer tax (Stamp Duty Land Tax) on houses costing over £125, 000. Sorry you asked?
Quote from: DeterminedJuliet on July 16, 2012, 04:08:00 PM
I think there's something similar that already exists in Canada - as far as I know, if you flip a house that's not your primary residence, it's taxed business income. If it is your primary residence, I think it depends on how long you live in it (I think you have to live in the house for a minimum of a year for it to not count as "flipping" for business purposes). House flipping is pretty uncommon here for that reason. You see a lot more people buying property to convert into rental units.
My first instinct is to agree that taxing people for the slow accumulation of value that a well-cared for home will get over the years seem a bit unfair.
Exactly how it works in UK.
'Flipping' is certainly a term used here - Gramps must be having a senoir-moment :P
When times are good (ie pre 2008) you could flip a house without doing any work just because of market rise between purchase and sale. I did it several times with apartments and land (though we also obtained planning permission to boost the value). Not much scope these days unless you can do all the work yourself (this is how builders survived the recession). Our latest project is our own house to maximise profit without paying the tax.
It's pretty tightly sewn-up here, but over the last few years we have been able to charge all our home renovation costs to other projects. This means we do not end up paying the VAT (sales tax), plus we can offset the expenditure against 'profit' on the other properties reducing tax on Capital-gains.
I'm not sure what justification government can have to charge tax against personal property. I guess we're so used to being taxed for everything we've lost sight of the need for a reason.
And to address the OP, why it this just a right-wingers' bugbear? - its unfair for everyone!
Quote from: En_Route on July 16, 2012, 07:01:37 PM
Quote from: OldGit on July 16, 2012, 06:32:01 PM
What Ali said. I don't know how the tax works here for 'flipping' (not a word we use in English.)
In broad terms, gains on disposals of private residences are exempt from tax in the UK. Depending on how wealthy you are and how efficient your tax planning is, part or all of the value of your house might be taxed on your death at 40%, but this does not affect the vast majority of the population. Imposing a tax on such gains would have the effect of impeding labour mobility, bearing in mind that there is a already a transfer tax (Stamp Duty Land Tax) on houses costing over £125, 000. Sorry you asked?
If I'm not mistaken, I think a person must transfer a property to an heir 9 years before his death to avoid the inheritance tax. So you gotta plan your death properly here!
Is this something new that has been announced? or is it something contained in the plans for ages? if its the second then the tax shouldn't really be the issue, the issue should be that the republicans are incompetent.
Quote from: Scissorlegs on July 16, 2012, 07:23:11 PM
Quote from: En_Route on July 16, 2012, 07:01:37 PM
Quote from: OldGit on July 16, 2012, 06:32:01 PM
What Ali said. I don't know how the tax works here for 'flipping' (not a word we use in English.)
In broad terms, gains on disposals of private residences are exempt from tax in the UK. Depending on how wealthy you are and how efficient your tax planning is, part or all of the value of your house might be taxed on your death at 40%, but this does not affect the vast majority of the population. Imposing a tax on such gains would have the effect of impeding labour mobility, bearing in mind that there is a already a transfer tax (Stamp Duty Land Tax) on houses costing over £125, 000. Sorry you asked?
If I'm not mistaken, I think a person must transfer a property to an heir 9 years before his death to avoid the inheritance tax. So you gotta plan your death properly here!
The period is 7 years. It can be tricky transferring your home because in broad terms if you continue to live there, it is not easy to establish it as a genuine gift.
Quote from: Scissorlegs on July 16, 2012, 07:14:56 PM
Quote from: DeterminedJuliet on July 16, 2012, 04:08:00 PM
I think there's something similar that already exists in Canada - as far as I know, if you flip a house that's not your primary residence, it's taxed business income. If it is your primary residence, I think it depends on how long you live in it (I think you have to live in the house for a minimum of a year for it to not count as "flipping" for business purposes). House flipping is pretty uncommon here for that reason. You see a lot more people buying property to convert into rental units.
My first instinct is to agree that taxing people for the slow accumulation of value that a well-cared for home will get over the years seem a bit unfair.
Exactly how it works in UK.
'Flipping' is certainly a term used here - Gramps must be having a senoir-moment :P
When times are good (ie pre 2008) you could flip a house without doing any work just because of market rise between purchase and sale. I did it several times with apartments and land (though we also obtained planning permission to boost the value). Not much scope these days unless you can do all the work yourself (this is how builders survived the recession). Our latest project is our own house to maximise profit without paying the tax.
It's pretty tightly sewn-up here, but over the last few years we have been able to charge all our home renovation costs to other projects. This means we do not end up paying the VAT (sales tax), plus we can offset the expenditure against 'profit' on the other properties reducing tax on Capital-gains.
I'm not sure what justification government can have to charge tax against personal property. I guess we're so used to being taxed for everything we've lost sight of the need for a reason.
And to address the OP, why it this just a right-wingers' bugbear? - its unfair for everyone!
If HMRC had probed your affairs they would probably have succeeded in taxing the profits on your flipping
ventures as trading income.The case law is on their side. On the face of it, charging expenses incurred in relation to your home against other taxable projects is to put it kindly questionable. Again if HMRC cotton to this, they will not be impressed.
Quote from: En_Route on July 16, 2012, 08:06:42 PM
Quote from: Scissorlegs on July 16, 2012, 07:14:56 PM
Quote from: DeterminedJuliet on July 16, 2012, 04:08:00 PM
I think there's something similar that already exists in Canada - as far as I know, if you flip a house that's not your primary residence, it's taxed business income. If it is your primary residence, I think it depends on how long you live in it (I think you have to live in the house for a minimum of a year for it to not count as "flipping" for business purposes). House flipping is pretty uncommon here for that reason. You see a lot more people buying property to convert into rental units.
My first instinct is to agree that taxing people for the slow accumulation of value that a well-cared for home will get over the years seem a bit unfair.
Exactly how it works in UK.
'Flipping' is certainly a term used here - Gramps must be having a senoir-moment :P
When times are good (ie pre 2008) you could flip a house without doing any work just because of market rise between purchase and sale. I did it several times with apartments and land (though we also obtained planning permission to boost the value). Not much scope these days unless you can do all the work yourself (this is how builders survived the recession). Our latest project is our own house to maximise profit without paying the tax.
It's pretty tightly sewn-up here, but over the last few years we have been able to charge all our home renovation costs to other projects. This means we do not end up paying the VAT (sales tax), plus we can offset the expenditure against 'profit' on the other properties reducing tax on Capital-gains.
I'm not sure what justification government can have to charge tax against personal property. I guess we're so used to being taxed for everything we've lost sight of the need for a reason.
And to address the OP, why it this just a right-wingers' bugbear? - its unfair for everyone!
If HMRC had probed your affairs they would probably have succeeded in taxing the profits on your flipping ventures as trading income.The case law is on their side. On the face of it, charging expenses incurred in relation to your home against other taxable projects is to put it kindly questionable. Again if HMRC cotton to this, they will not be impressed.
Fuck HMRC!
Crow, I am unsure but I believe that this has been in the plan all along. There needed to be a scheme for raising revenue to benefit the health care plan. This tax will surely not balance the budget but it might help a little. The reason I was picking on the conservatives is that anything that smells like a tax is anathema for them. Liberals are not enamored of more taxes either. However the libs are more tolerant of the necessity.
Ali, the improvements that you have made to your house is part of your total cost. If you sold it for a paper profit then the original purchase price, mortgage interest, and improvement costs would be factored into the profit or loss calculations. A really clever tax accountant might even use imputative value of the work that you have done personally. That would be tricky because it would be counted as earned income and be subject to income taxes. Unearned income is treated entirely differently.
So far as I can determine, there is no accounting for the inflation rate during the time that you owned the house. That means that the dollar you gain today is not as valuable as the dollar you gained five or ten years ago. The whole bit is a sticky wicket that is sure to cause some heated conversations in the long run.
I think that we could start a whole 'nother thread to explore the reasons why heath care in the US is the highest cost in the world and climbing continuously. If our health care is the worlds most expensive but our outcomes are not as good as ....say, France, then something is wrong.
Quote from: Scissorlegs on July 16, 2012, 08:37:47 PM
Quote from: En_Route on July 16, 2012, 08:06:42 PM
Quote from: Scissorlegs on July 16, 2012, 07:14:56 PM
Quote from: DeterminedJuliet on July 16, 2012, 04:08:00 PM
I think there's something similar that already exists in Canada - as far as I know, if you flip a house that's not your primary residence, it's taxed business income. If it is your primary residence, I think it depends on how long you live in it (I think you have to live in the house for a minimum of a year for it to not count as "flipping" for business purposes). House flipping is pretty uncommon here for that reason. You see a lot more people buying property to convert into rental units.
My first instinct is to agree that taxing people for the slow accumulation of value that a well-cared for home will get over the years seem a bit unfair.
Exactly how it works in UK.
'Flipping' is certainly a term used here - Gramps must be having a senoir-moment :P
When times are good (ie pre 2008) you could flip a house without doing any work just because of market rise between purchase and sale. I did it several times with apartments and land (though we also obtained planning permission to boost the value). Not much scope these days unless you can do all the work yourself (this is how builders survived the recession). Our latest project is our own house to maximise profit without paying the tax.
It's pretty tightly sewn-up here, but over the last few years we have been able to charge all our home renovation costs to other projects. This means we do not end up paying the VAT (sales tax), plus we can offset the expenditure against 'profit' on the other properties reducing tax on Capital-gains.
I'm not sure what justification government can have to charge tax against personal property. I guess we're so used to being taxed for everything we've lost sight of the need for a reason.
And to address the OP, why it this just a right-wingers' bugbear? - its unfair for everyone!
If HMRC had probed your affairs they would probably have succeeded in taxing the profits on your flipping ventures as trading income.The case law is on their side. On the face of it, charging expenses incurred in relation to your home against other taxable projects is to put it kindly questionable. Again if HMRC cotton to this, they will not be impressed.
Fuck HMRC!
Quite. However, be aware if you are not careful, they could end up fucking you.
Quote from: En_Route on July 16, 2012, 08:51:40 PM
Quote from: Scissorlegs
Fuck HMRC!
Quite. However, be aware if you are not careful, they could end up fucking you.
Thanks. I shall show them reciprocal respect as ever!
Not sure how I feel about that new tax information, except to say I guess we'll see when we get there. Doesn't seem too unfair. I do know there's still a lot we don't know about the Affordable Care Act, and a lot of misinformation. A conservative I work with was telling me today he was mad that the Dems wanted to shove this down our throat, but of course they won't have to live with it, and will continue getting their premium awesome health care courtesy of the taxpayers. I had to tell him this was incorrect, as the Affordable Care Act forces Congress persons to choose between a private health care option they can pay for out of their own pocket, or if they still want a government health plan, they will be forced to use the local exchanges just like commoners.
Quote from: fester30 on July 20, 2012, 09:34:44 PM
Not sure how I feel about that new tax information, except to say I guess we'll see when we get there. Doesn't seem too unfair. I do know there's still a lot we don't know about the Affordable Care Act, and a lot of misinformation. A conservative I work with was telling me today he was mad that the Dems wanted to shove this down our throat, but of course they won't have to live with it, and will continue getting their premium awesome health care courtesy of the taxpayers. I had to tell him this was incorrect, as the Affordable Care Act forces Congress persons to choose between a private health care option they can pay for out of their own pocket, or if they still want a government health plan, they will be forced to use the local exchanges just like commoners.
Its not just misinformation, but, deliberate disinformation. It is unfortunate but there are a lot of people who are are veamently opposed the the Health Care Reform Act and are only to willing to lie and misrepresent what the act says in order to defeat it.