The facts are as follows:
• First of all, the new tax is applicable only to the gain on sale, not the entire sales price.
• The tax applies only to single taxpayers with modified adjusted gross income in excess of $200,000 and married taxpayers with modified adjusted gross income over $250,000 if filing a joint return, or $125,000 if filing separately.
• The tax is actually only equal to 3.8% of the lesser of the taxpayers’ “net investment income” or the amount by which their modified adjusted income exceeds the threshold amount.
• Only taxpayers with modified adjusted gross income over $200,000 (or $250,000 if married filing jointly) who sell their principal residence AND realize more than $250,000 in GAIN ($500,000 if married filing jointly) will be subject to the 3.8% tax and only on the amount of gain they realize OVER the $250,000/$500,000 threshold (and on their other net investment income).