Exposing the 3.8% “transfer tax” on home sales in the health care bill
There has been an avalanche of discussion, reports, email distribution, etc. regarding a deeply embedded provision in the Health Care Bill regarding a proposed 3.8% “sales tax” on all real estate transactions. In my research I have found a thorough analysis of the tax (link below). There is truth to the 3.8% transaction tax, however it does not affect all transactions, but it is yet another tax. Please review the excerpt below and click on the link at the bottom to download a thorough Q & A report.
From the National Association of Realtors® website:
False Claim: The health care bill contains a 4.0 percent “transfer tax” on homes sales. An opinion piece in the Spokane, Wash., Spokesman-Review last month FALSELY reported that the health care bill contained a provision for a 4.0 percent “sales tax” or “transfer tax” on the sale of a home.
An e-mail was circulated far and wide, and is inaccurate. We responded to questions from the media and members and continue to do so. This week we got a boost from an unexpected third-party, the Portland (Ore.) Oregonian. The Oregonian did some old-fashioned fact-checking, and reached correct conclusions published Tuesday, April 27.
Read the analysis by FACTCHECK.ORG, SUMMARY:
THE CLAIM IS FALSE. Let us sum up: 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.
Some other quick points:
• The new Medicare tax will take effect January 1, 2013.
• The legislation makes no changes to the mortgage interest deduction.