How the New 3.8% Tax Impacts Real Estate Transactions?

There is a great deal of confusion and conversation circulating around the 3.8% Medicare tax that goes into affect on January 1st, 2013.

In his recent guest column regarding the impact of the health care bill, Paul Guppy of the Washington Policy Center claimed that a 3.8 percent tax on all home sales was a part of the recently passed legislation. This is inaccurate and needs to be corrected.

The truth about the bill is that if you sell your home for a profit above the capital gains threshold of $250,000 per individual or $500,000 per couple then you would be required to pay the additional 3.8 percent tax on any gain realized over this threshold.

Most people who sell their homes will not be impacted by these new regulations. This is not a new tax on every seller, and that correction needs to be made. This tax is aimed at so-called “high earners” – if you do not fall into that category you will not pay any extra taxes upon the sale of your home.

Below is a link to a report published by The National Association of Realtors that will help allay your fears.

Here is the report summarized:

Beginning January 1, 2013, a new 3.8 percent tax on some investment income will take eﬀect. Since this new tax will aﬀect some real estate transactions, it is important to clearly understand the tax and how it could impact you.

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.