The rumors have been spreading lately, through email mostly, about a new real estate sales tax attached to the Health Care Reform Bill. They usually say something like “UNDER THE NEW HEALTH CARE BILL – DID YOU KNOW THAT ALL REAL ESTATE TRANSACTIONS ARE SUBJECT TO A 3.8% SALES TAX?”. While this may scare individuals who may be looking sell real estate the truth is most probably have no reason to worry.
A new tax does exist, however it applies to only a fraction of sellers and it isn’t a “sales” tax. For example, if your adjusted gross income is less than $200,000 a year (or less than $250,000 if filing jointly) then you are exempt, this bill does not apply to you. I’m sure that makes many would be sellers happy, but what about everyone else? There’s some good news for them as well.
For those earning over $200,000 a year this tax still does not apply to the first $250,000 ($500,000 if married) of profits received from the sale of your home. Who has to worry about this? Here are some examples taken from FactCheck.org:
FactCheck.org also restores hope to those still worried about facing this tax:
While there is a tax for very few, it isn’t a sales tax and will hardly affect the real estate market. It certainly isn’t as bad as it is made out to be in the rapidly spreading emails. This tax is a Medicare tax, allocated to the Medicare Trust Fund, which is a part of the Social Security System. The Medicare tax applies to individuals with an adjusted gross income over $200,000 a year who sell a principal residence or second home for a profit of over $250,000, and the tax is computed only on the sale amount over $250,000 (the first $250,000 is exempt.)
This posting is an editorial and is not intended as legal or tax advice. Please contact your tax professional for proper guidance.
Jeff Sorg is a co-founder of OnlineEd®, an online real estate, mortgage broker, and vocational school founded in 1997, where he also serves as Chief Executive Officer, and School Director. Sorg holds vocational and post-secondary school instructor licenses in several states and has authored numerous real estate continuing education and pre-licensing courses and has been awarded the International Distance Education Certification Center’s CDEi Designation for distance education. Memberships include ARELLO (Association of Real Estate License Law Officials), the National Association of REALTORS®, Oregon Association of REALTORS®, and Portland Metro Association of REALTORS®. Awards and service include REALTOR® Emeritus in the National Association, Life Member award in Portland Metro Association and Chairperson of the Oregon Real Estate Forms Committee.
OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.