Did Healthcare Reform impose a 3.8% TRANSFER/SALES TAX on Real Estate???

Real Estate Agent with Ask Cathy Marketing Group with Keller Williams


It's all just a nasty rumor.  So, let's get the facts straight!  Check out this Snopes link: http://www.snopes.com/politics/taxes/realestate.asp

I think Snopes put it best "Health care legistlation imposes a 3.8% transaction tax on profits over the capital gains threshold".


Basically, here it is...If your Adjusted Gross Income is over $200,000 as a single person or $250,000 as a married couple you may be subject to this 3.8% Medicare Tax when you sell your home IF you realize a GAIN of more than $250,000 as a single person and $500,000 as a married couple.  There is already an exclusion on the Capital Gains up to the $250,000/$500,000 so the tax would apply to the amount after that.  If your adjusted gross income is less than $200,000/$250,000 but the capital gain of your property over the exemption pushes you over the Adjusted Gross Income amounts, then you would pay. 

Check out this excerpt from the Kansas City Regional Association of Realtors' Official Newsletter:

KCRAR Transfer Tax Excerpt

So, from what I understand, and I am NOT an accountant, if you are a single person and you make $100,000 a year and you sell your principal residence with a gain of $375,000, then you will get taxed:

Math: Capital Gain Exemption for Single person is $250,000. Your gain is $375,000 so your taxable gain is $125,000.  And that is considered Investment Income, so add that to your $100,000 you made in your salary and your Adjusted Gross Income is now $225,000 for that tax year.  That means you qualify to pay this tax because your adjusted gross income is over the $200,000 threshold. Since you now qualify you would be taxed 3.8% on the $125,000 = $4,750.

If you think your personal situation will be affected by this tax, then PLEASE call your tax professional prior to listing your house for sale. Nobody likes an approximately $5,000 surprise at the tax consultation! You may have waited to move until a different time OR you may have collected more receipts for the improvements you made to your home to reduce your capital gain amount.  There are many ways your accountant can help you strategize!

So, the main point of this Blog is that there is NOT a Transfer Tax nor a Sales Tax on the sale of your home.  The seller must meet several criteria to qualify to be taxed and your tax accountant is the best person to tell you if you meet that criteria.  

Call me if you need a fantastic Tax Accountant. I absolutely love mine! Allen Matthews in Overland Park, KS. He is super smart!



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Cathy Counti

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