The True about the 3.8% Obama Tax on Real Estate Sales

You may have heard about a federal tax on the sale of homes buried deep in the recent health care legislation. You may have heard rumors or seen internet stories about how this secret tax (3.8%) applies to every home sale starting now. It is important to understand that much of what you see and read on the internet about this element of the new law is exaggerated and/or inaccurate.

Here’s the truth: ·     There is a new federal tax on part of the gain; for some high income sellers; who have substantial dollar gains on the sale. ·     The new tax is 3.8% on the amount above the existing exemption of the first $250,000 in gain for single taxpayers and $500,000 for married (filing jointly) taxpayers. This exemption only applies if the taxpayers have lived in the home two out of the last five years. In addition, interest, dividends, net rents, net capital gains all fall into this category. ·     The new tax is applied only if the taxpayer has an Adjusted Gross Income (AGI) of $200,000 for a single and $250,000 for married (filing jointly). And then, it only applies to the lesser of the qualified investment income amount or the excess of AGI over the $200,000 or $250,000. ·     The new tax starts for sales in 2013. ·     It is likely the U.S. Supreme Court will be asked to decide if the new law stands before this portion ever takes effect.

This new tax was never introduced, discussed or reviewed by the real estate industry (NAR) and most legislators until just hours before the final debate and vote on the massive health care bill.

To learn more about the new tax law, click here and search “3.8% Tax.” They have an excellent booklet with details on a variety of scenarios as well as FAQ’s.


Posted by: David Caveness

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