We have heard a lot of people asking us if sellers will have to pay 3.8% sales tax on a home they sell from the “Affordable Care Act in March 2010”.
Over the past 18 months some of you may have received an email saying something like:
“Did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That’s $3,800 on a $100,000 home, etc. When did this happen? It’s in the health care bill and goes into effect in 2013. Under the new health care bill all real estate transactions will be subject to a 3.8% sales tax.”
It sounds terrible…but it is simply not true.
Since the passage of the Affordable Care Act in March 2010, individuals and groups on all sides of the healthcare issue have been responding to various provisions included in the new law and regulations. Unfortunately, not all of the claims about the law have been accurate, making it difficult for those who really want to understand the changes.
This post is not intended to debate any of the substantive issues involved in the legislation and its implementation but to help debunk one particular myth being spread through the real estate industry.
As explained by the National Association of Realtors:
Understand that this tax WILL NOT be imposed on all real estate transactions, a common misconception. Rather, when the legislation becomes effective in 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses). The tax will fall only on individuals with an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI.
And perhaps most importantly for some Realtors®, the existing capital gains exclusions that apply to residential real estate still apply. Even if a seller has an adjusted gross income above the income threshold, the new tax only kicks in if the profit from a sale (not the sales price, but the profit) is greater than $250,000 for an individual or $500,000 for a married couple.
Thank you to Chuck Liedike, MPA, e-PRO, Government Affairs Director at the Reading-Berks Association of REALTORS® for this information and explanation!