Several people have asked me about the alleged Federal Home Sales Tax. Here is an excerpt from an article in the November/December 2010 publication of "BayState Realtor", the official publication of the Massachusetts Association of Realtors.
FEDERAL SALES TAX ON HOMES?
Q. Is it true that a provision in the new federal health care law will put a new 4% tax on all home sales?
A. No. The following directly addresses the issue:
An opinion piece in the Spokane, Wash, Spokesman-Review last month FALSELY reported that the health care bill contained a provision for a 4% "sales tax" or "transfer tax" on the sale of a home. This e-mail was and is inaccurate. The analysis by FACTCHECK.ORG: The claim is False. The health bill included a provision that imposes a new 3.8% 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 $200K for individuals or more than $250K 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 - $250K (individual)/$500K (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 $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.
Hope this information is helpful. If you would like a "paper" copy of this article, feel free to contact me and I will gladly send it to you!