The 3.8% Tax Myth

There remains plenty of confusion about the 3.8% tax, included in ObamaCare. The full truth can be found below. If you have any questions, simply let me know.

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.

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 bad…but it is simply not true.

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.

The following are detailed links that provide needed information for you and your clients:

• National Association of REALTORS® Blog Post w/ Video
• National Association of REALTORS® 3.8% Tax Comprehensive Brochure
• National Association of REALTORS® 3.8% Tax FAQs

Dave Mattes, RE/ MAX of Reading


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