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.
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)
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…