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.
La Jolla, Calif.
1 of 4
Sold for: $5.45 million
Estimated tax savings: $260,000
Sales of luxury homes spiked in the final months of 2012, as high-end homeowners rushed to take advantage of lower tax rates before January 1.
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% Medicare surtax on investment income slated to go into effect in 2013 as part of the Affordable Care Act.
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 January 1 tax law changes, said agent Drew Nelson of Willis Allen Real Estate.
By raking in about $3 million in profitin 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%.