3.8% Sales Tax on Real Estate sales?
Have you received that email about the new 3.8% sales tax on real estate that's coming? Here's a great post that gets down to the truth of the matter, written by Alan May, a broker from the Chicago area.
An agent in our office received this in her e-mail. She asked her husband (the real estate attorney) if it were true.
Neither of them had heard anything about this. You would think that if this were true, one of the two of them, would know something about it.
____________________
I immediately hit the internet
searching for the answer.
It must be true, after all, it says
"verified" right in the e-mail itself.
____________________Well, as you can imagine it's only fractionally true. If you happen to run across this e-mail, or a client of yours calls panicky after reading this e-mail, you'll know the facts:
According to FactCheck.com only a tiny percentage of home sellers will pay the tax. Only those with incomes over $200,000 a year (or $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.
I think this stands repeating: ONLY those with incomes of $200,000 or more will be subject to it (or $250,000 for married couples filing jointly). And the tax will only be on the portion of your PROFIT that is above $250,000, (or $500,000 for married couples).
So... instead of an additional $15,200 tax on the sale of your $400,000 home. It's possible you'd have ZERO additional tax if you don't make $200,000 a year. And if you do make more than that... and you make no profit... you'd still have a ZERO additional tax burden. Let's say you were lucky, you manage to make $300,000 a year in income, and you sold your home for a $100,000 profit. You'd only be paying $3,800. in additional tax. $11,400 less than the inflammatory e-mail suggests.
And snopes.com has a slightly different take, still saying that it's wrong and misleading, and that someone making over $200,000 who sells their $2 million dollar home for a $750,000 profit would only have a $9,500 tax burden.
This is, of course, in additional to any existing state and local taxes you already have.
I don't know exactly what the agenda is, of the sender of this e-mail... (although I could venture a guess, and I imagine it's somewhat political)... but TRUTH, was not on that agenda.
UPDATE: Turns out my buddy Matt Stigliano wrote a great post about this very subject (and did a better job than I did) in April!!
ALAN MAY, Realtor®
Specializing in Evanston Real Estate and North Shore Real Estate
-------------------------------
Coldwell Banker Residential Real Estate, 2929 Central Street, Evanston, IL 60201
847.425.3779 Cell: 847.924.3313 Email: Almay@aol.com
Comments(3)