New 3.8 percent tax on investment income will take effect

Shortly after federal government enacted healthcare reform in 2010, there was considerable concern over a last-minute addition to the legislation: a 3.8% tax on investment income of upper-income households to help shore up Medicare. The tax takes effect on January 2013.

 Passed by Congress in 2010 with the intent of generating an estimated $210 billion to help fund President Barack Obama’s health care and Medicare overhaul plans — could be relevant to your clients.

 Understand that this tax WILL NOT be imposed on all real estate transactions, a common misconception. Rather, when the legislation becomes effective in 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses). The tax will fall only on individuals with an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI.

  Applies to: Individuals with adjusted gross income (AGI) above $200,000 Couples filing a joint return with more than $250,000 AGI
Types of Income: Interest, dividends, rents (less expenses), capital gains (less capital losses)
Formula: The new tax applies to the LESSER of Investment income amount Excess of AGI over the $200,000 or $250,000 amount 

New tax, dedicated to Medicare funding, is imposed on the so-called “earned” income of higher income individuals. Th is earned income tax has a much lower rate of 0.9% (0.009). Like the tax described in this brochure, this additional or alternative tax is based on adjusted gross income thresholds of $200,000 for an individual and $250,000 on a joint return. Like the 3.8% tax, this 0.9% tax is imposed only on the excess of earned income above the threshold amounts.

Another way of thinking about these new taxes is to think of the 3.8% tax as being imposed on a portion of the money that you make on your money — your capital (sometimes referred to as “unearned income”). Th e 0.9% tax is imposed on a portion of the money you make on your labor — your salary, wages, commission and similar income related to earning a livelihood. ★

Call Tatyana Baytler: Real Estate Broker - 443-527-4375

HOUSING FINANCE AND POLICY UPDATES

HOUSING FINANCE AND POLICY UPDATES FREE Independent Foreclosure Review This policy is for borrowers who believe they suffered financial injury as a result of errors, misrepresentations, or other deficiencies in foreclosure proceedings. DEADLINE: Complaint forms must be submitted online or postmarked by July 31, 2012 Specified mortgage servicers were required to send mailings to potentially eligible borrowers and former homeowners on how to request a review of their case with the mandatory form. But lenders may not be able to reach borrowers who lost their homes to inform them that they may be eligible. Know anyone who has suffered financial harm due to errors or other problems in the foreclosure process? He or she may be eligible for FREE Independent Foreclosure Review. BEWARE of anyone who offers to complete the Request for Review Form for a service fee. Eligibility: The mortgage must have been in active foreclosure process between January 1, 2009, and December 31, 2010; the property securing the loan must have been the primary residence; and the mortgage must have been serviced by one of the identified mortgage servicers. For more information and to see a list of the mortgage servicers, go to: https://independentforeclosurereview.com or call 1-888-952-9105 M-F, 8 a.m.–10 p.m. ET, or Sat. 8 a.m.–5 p.m. ET. National Foreclosure Settlement The agreement will be executed over the next 3 years. In the next 3 to 6 months, a settlement administrator, Maryland Attorney General and mortgage servicers will work to identify homeowners eligible for immediate cash payments, principal reductions and refinancing. Banks include: Ally Financial/GMAC, Bank of America (plus Countrywide), CitiBank, JP Morgan Chase (plus Washington Mutual) and Wells Fargo. Those eligible will receive letters. (Loans owned by Fannie Mae or Freddie Mac are NOT involved in the settlement.) The settlement provides financial assistance for: • Individual borrowers who were victims of unfair servicing practices and were foreclosed upon between January 1, 2008 and December 31, 2011. • Homeowners needing loan modifications now, including first and second lien principal reduction. Servicers must work off an estimated $808 million in principal reduction and other forms of loan modification relief for Maryland homeowners. • Borrowers who are current in their payments, but underwater. Eligible borrowers may refinance at today’s historically low interest rates. Servicers must provide an estimated $64 million in financing relief for Maryland homeowners. • Borrowers who lost their homes to foreclosure without losing the right to sue banks. An estimated $24 million will be distributed to these Maryland borrowers. • Housing counseling and other state-level foreclosure prevention and housing programs. For more information on the Mortgage Servicing Settlement, go to: www.NationalForeclosureSettlement.com For loan modifications and refinance options, borrowers may be contacted directly by one of the five participating mortgage servicers. Borrowers may contact the banks directly, if additional information or verification is needed. BEWARE! Scammers are already at work trying to capitalize on the national mortgage settlement to access victim’s personal financial information—or worse, charge fees for this FREE program Maryland Attorney General’s Office Call Center: 410-576-6300 or 1-888-743-0023 Maryland HOPE Hotline: 1-877-462-7555 Capital Area Foreclosure Network (CAFN) (Statewide Referral to Spanish/Espanol Language Assistance.) 1-888-794-8830 (9:00 am to 5:00 pm, M- F) Ally//GMAC: 1-800-766-4622 Bank of America (and Countrywide): 1-877-488-7814 Citi: 1-866-272-4749 JPMorgan Chase (and Washington Mutual): 1-866-372-6901 Wells Fargo (And Wachovia) : 1-800-288-3212 News on Home Affordable Foreclosure Alternatives (HAFA) The Federal Housing Finance Agency (FHFA) has announced a new directive that requires servicers of Fannie and Freddie loans to roll out in stages, starting in June 2012: • Review and respond to borrower requests for short sales within 30 days after receipt of a short sale offer and a complete borrower request. • If the review is still under way after 30 days, give the borrower weekly status updates. • Advise the borrower of the final decision within 60 days after receipt of a short sale offer and a complete borrower request. The new timelines apply both to HAFA loans and to other short sales approved by Fannie Mae and Freddie Mac. Additional enhancements are planned by the end of 2012 addressing borrower eligibility, simplifying documentation, valuing property, payments to subordinate lien holders, and mortgage insurance. FHA Premiums for Refinance In April, FHA increased upfront and annual premiums for new loans. But many real estate professionals missed the second part of the announcement: PRICE CUTS for FHA Streamline Refinance Option for loans originated on or before 5/31/2009, effective 6/11/2012 Upfront premium, 0.01%; monthly premium 0.55%. Estimated savings of $3,000 per year for the average loan. Borrower must be current on payments, underwater mortgages are okay, “compare ratio” is not required by lenders. Go to: http://portal.hud.gov/hudportal/ HUD?src=/program_offices/housing/sfh/ buying/streamli (or contact a HUD certified housing counselor or any HUD/FHA approved lender)