By selling their luxury homes before the end of 2012, these wealthy homeowners avoided two tax increases on Jan. 1 and a huge payout to the IRS.
Not only were these sellers concerned that fiscal cliff talks would lead to a hike in the capital gains rate, but many were already facing a 3.8 percent Medicare surtax on investment income slated to go into effect in 2013 as part of the Affordable Care Act.
4 Homes That Sold in the Nick of Time
Big Home Sales, Big Tax Savings
Location:La Jolla, Calif. Sold for: $5.45 million Estimated tax savings: $260,000
The sellers of this five-bedroom property decided to upgrade to a house on the beach one block away -- and they made sure to close the deal ahead of the Jan. 1 tax law changes, said agent Drew Nelson of Willis Allen Real Estate.
By raking in about $3 million in profit in 2012 instead of 2013, they saved more than $110,000 on the 3.8% Medicare surtax on investment gains and another $150,000 or so on the hike in the capital gains rate to 20% from 15%.
Location:Chevy Chase, Md. Sold for: $2.6 million Estimated tax savings: $110,000
In this posh suburb of Washington D.C., the sellers of this eight-bedroom brick Georgian were hoping to unload their home before Jan. 1.
The house had gained $1.8 million in value since it was last sold in 2005, some of which was courtesy of a few hundred thousand dollars of work the sellers put into it. With the impending Medicare surtax on investment income and the potential hike in capital gains rate to 20% from 15%, the owners were facing a huge tax bill if they sold after Jan. 1.
Luckily, they managed to close a deal in November, resulting in a tax bill that was about $110,000 cheaper than what they would have had to pay if they had sold this year.
Location:Malibu, Calif. Sold for: $4.2 million Estimated tax savings: $200,000
Beach property in California is typically hard to come by. Nevertheless, this home sat on the market for more than a year before it finally sold.
Luckily for the owners, the deal on this big, modern home closed before New Years.
Even after updates and improvements, the sellers still turned a tidy profit. They bought the house for just $840,000 back in 1993. And by selling before Jan.1, they were able to save roughly $200,000 in capital gains taxes and the Medicare surtax.