Is There a National Real Estate Transfer Tax On All Homes Sold After 2012?

Welcome Back Readers!  Thanks for stopping by again! 

There's alot of emails that circulate during an election year, one of the most common ones this year relates to a real estate is that the federal health care legislation (affectionately called Obama-care) passed in March 2010 contains a 4.0% transfer tax on all real estate sold after 2012.  You might be wondering if this is true or not.  Well, in short the answer is no.  There is no national transfer tax on all real estate.  

But like all great myths, this one does have a small grain of truth to it.  There is indeed a tax on certain real estate transactions specified in the bill.  A fact sheet released by the National Association of Realtors sums it up nicely: 

 The health bill included a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have "net investment income."   Any revenue collected by the tax is dedicated to the Medicare hospital insurance program.  This new tax applies only to households with Adjusted Gross Income (AGI) of more than $200,000 for individuals or more than $250,000 for married couples.  Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property.Even if the AGI limits are met, the new tax would not be applied to capital gains that result from the sale of a home, since the existing home sale capital gains exclusion rule still applies - $250,000 (individual)/$500,000 (couple).  So if the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid on the gain.  The new Medicare tax would apply only to a home sale gain realized in excess of the $250K/$500K that pushes the filer's AGI over the $200K/$250K income limits. 

So, the bottom line is that there is a tax, but it would affect only those selling real estate subject to capital gains taxes, and then only if they exceed the income limits.  Not a great thing, but far from a tax on all homes purchased across the nation.  If you have any questions about how this tax might affect you, I recommend that you contact a qualified accountant for advice.