Will you Pay a 3.8% Sales Tax If You Sell Your Home After 2012??

By
Mortgage and Lending with Summit Funding, Inc. NMLS# 32965
https://activerain.com/droplet/wCJ

 

Will you Pay a 3.8% Sales Tax If You Sell Your Home After 2012??

 

 

 

I LOVE to write! It has always been a great passion of mine that until recently I had left behind.

 

However, one of the principal lessons I was educated on regarding this subject was from a woman who didn’t make it past the 5th grade- my grandmother.

 

She said, “speak from your heart, stand behind what you say and remember that once it is written- it is always perceived as the truth(whether it is or not).”

 

Nothing rings more true to me these days than those words of wisdom. With the widespread phenomenon of the internet and ease of accessibility, EVERYONE has a voice. While I think that is awesome, the power of the written word still comes with great responsibility for all of us.

Girl Gossiping Home ales and Purchase and Sales Tax

Several times a week I receive an email or a phone call from either a Realtor, Title Company or concerned client about the upcoming “3.8% Sales TAX on RE properties” that was “hidden” in the Health Care Reform Bill (ObamaCare) scheduled to take place in 2013.  So, being the curious cat I am, I decided to check it out for myself.

 

Rumor has itthere will be a Medicare Tax of 3.8% on ALL real Estate Transactions once the bill comes into play. So, if you were to sale your home for $100,000, you would pay 3.8% in sales tax. That would be a steep $3,800.00

 

I can understand how this rumor can get started (the Bill itself is written in a Foreign, Alien language (probably Klingon) and is over 2000 pages long, for Pete’s sake)

 

However, it is an incomplete and incorrect statement-

 

It is a Rumor It that gains powerevery time it is restated amongst us.

 

The Reality is that there is a Medicare Tax in the middleof the Health Care Reform Bill, but it is NOT a Sales Tax on ALL Real Estate; it is more of an investment tax on profit earned BEYOND certain measures. It is a Capital Gains tax (similar to what we have had before but a little more steep-IMO)

Home Door Purchase and ales tax for Home

From what I understand, if you sell your primary residence and you have a NET PROFIT over $250,000 as an individual/ $500,000 as a married couple, then the 3.8% tax on the capital gains (unearned income) will apply.

 

In other words, the tax applies to the excess of any profit OVER these thresholds. So, if you profit over $500,000 as a couple, then the 3.8% tax applies to the amount OVER the 500k measure.

 

There is also a requirement that couples make more than $250,000 in adjusted gross income (singles more than $200,000) for the tax to apply to them

 

From my research, it is the “high earners” earning “HIGH NET profits” that are being targeted. Goodness, WHATEVERthat is supposed to mean.

 

Yes, if you are selling a vacation or investment home and profit over “certain amounts” and have income over a “certain amount”, you MIGHT be in danger of the 3.8% capital gains tax.

 

If you are fortunate to have that problem, You may need to speak to a CPA-  (BTW, I have an excellent one if you need one ) J

 

Full Disclosure-I did not write this as a political message nor do I agree with the way the Bill was written (I am sure there are other things in the OVER 2000 pages I need to research), nor is a comprehensive directive of that section of the bill

 

My intent was solely to educate on the possible consequences to the everyday person who may be looking to purchase a home yet is fearful because they were told they will have to pay 3.8% to sell it someday.

 

Whether I agree, or anyone agrees with the Health Care Reform, We just don’t need any more RUMORS right now scaring us from purchasing our future homes. In my humble opinion…

 

 

Posted by

Sharon LittleJohn

Senior Loan Officer

Service First Mortgage

NMLS# 32965

Cell: 972-365-1084

Office: 800-210-6822

Fax: 214-509-6883

SLittleJohn@ServiceFirstMtg.com

SharonLittleJohnGroup@Gmail.com

www.SharonLittleJohnGroup.com

 

1220 N Brazos, Suite 1

Whitney, TX 76692

 

 

                                                           

                                                                  Company NMLS: 166487

 

 

****FIRST TIME HOME BUYERS could be eligible for a MCC tax credit up to $2000 annually!    This is an exciting opportunity.  Don't miss a chance to buy a house and get cash back!  Ask us for more details.   Referrals are always welcomed and considered the greatest compliment.****

 

 

Texas Mortgage Disclosure

Figure: 7 TAC 81.200(c)

CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV . A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.

THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.

 
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38 sales tax on home sales

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Rainer
75,501
Sharon LittleJohn
Summit Funding, Inc. - Dallas, TX
972-365-1084 NMLS#32965, FHA VA USDA Conventional

Sorry- don't know why the words got so small at the end but I couldn't get them to change :)

Mar 02, 2012 05:47 AM #1
Rainer
136,597
Jon Eliason
EXIT Realty Advantage Pagosa, Pagosa Springs, Colorado - Pagosa Springs, CO

Sharon ~ Thank you for the Clarification. I had somebody ask me a question about "Sales tax on their home" a couple of weeks ago. I had no clue on how to answer that question. Now I can refer to this. Thanks again.

Mar 02, 2012 05:59 AM #2
Rainer
75,501
Sharon LittleJohn
Summit Funding, Inc. - Dallas, TX
972-365-1084 NMLS#32965, FHA VA USDA Conventional

Hi Jon,

You are very welcome! I hope it helps!

Mar 02, 2012 01:44 PM #3
Rainmaker
107,107
Karen Deis
ApartmentToolKit.com - Minneapolis, MN
When In-house training is not enough!

Sharon, what a great explanation.  So, the sales tax will kick in if someone makes a PROFIT of over $500,000, not the sales price, right? 

Mar 04, 2012 12:15 AM #4
Rainer
75,501
Sharon LittleJohn
Summit Funding, Inc. - Dallas, TX
972-365-1084 NMLS#32965, FHA VA USDA Conventional

Hi Karen,

You are correct. It is the married couple's profit made on the house in exces of $500,000 (or @250k) if you are single.

Thanks for reading!

 

Sharon

Mar 04, 2012 01:20 PM #5
Rainmaker
892,390
Sussie Sutton
David Tracy Real Estate - Houston, TX
David Tracy Real Estate for Buyers & Sellers

Well Sharon! That is a relief that someone out there knew this answer! I thank you for straighten it out for me!

Jan 20, 2013 09:43 AM #6
Rainer
75,501
Sharon LittleJohn
Summit Funding, Inc. - Dallas, TX
972-365-1084 NMLS#32965, FHA VA USDA Conventional

Hi Sussie! You are so welcome

Jan 22, 2013 02:19 PM #7
Rainmaker
892,390
Sussie Sutton
David Tracy Real Estate - Houston, TX
David Tracy Real Estate for Buyers & Sellers

How come you have not posted to your blog lately? Time to pony up!

Aug 19, 2013 08:42 PM #8
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Rainer
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Sharon LittleJohn

972-365-1084 NMLS#32965, FHA VA USDA Conventional
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