Over the weekend I got an email from a fellow Realtor®. His note was advising me how to vote in the upcoming election because of a law that was already passed and will take effect in January of 2013 and it does have people riled up even though they don’t understand it. Probably because it has to do with the health care act.
This was in the email and it is false.
UNDER THE NEW HEALTH CARE BILL – DID YOU KNOW THAT ALL REAL ESTATE TRANSACTIONS ARE SUBJECT TO A 3.8% “SALES TAX”?
Yes there is a new 3.8% tax but it isn’t going to impact anyone I know. I hate to be this way but the plight of the very wealthy does not tug at my heart strings. Maybe if I got to know some of the super rich things would be different.
This is the real story:
First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.The sort of people who would have to pay the tax might include, for example:
A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
An “empty nester” couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.
If you make more than 250K a year for a married couple or 200K for a single person and make more than 250K in profit on the sale of real estate of more than 500K of profit for a married couple be very worried because you will pay 3.8% in taxes on the profits that are over 250K or over 500K.
Is there a 3.8% tax on real estate sales? In general no.