Written by: Mike Harter, CPA/PFS, CFP®
Once the Supreme Court ruled on Obamacare, discussions and opinions started to swell about the tax implications in the law. While I am in no way a fan of Obamacare, I think you need to have the facts straight to have an informed opinion.
A recent email that was circulating was passing along wrong information (maybe on purpose to scare readers). The email was talking about the new tax on home sales after 2012. It said that you would be paying a 3.8% tax on the sale price of your home and all real estate transactions. A $100,000 home would be taxed $3,800 and a $400,000 home sale would be taxed $15,200.
Well there is a new tax on unearned income as part of the bill starting in 2013. And yes it is 3.8% and includes capital gains of which your home sale could qualify. However, there are a few more hurdles that must be met before the 3.8% tax is imposed. Hurdle 1 – The adjusted gross income in the year of sale must exceed $250,000 for a married couple and $200,000 for singles. Hurdle 2 – The capital gain must also exceed $500,000 for a married couple and $250,000 for singles. Keep in mind that we are talking about capital gain, not selling price as the incorrect email was alluding too.
The $500,000/$250,000 exemptions only apply to your primary residence. Not your second home and not other real estate properties. So yes, in addition to a capital gain tax (poised to raise to 20% in 2013) an additional 3.8% tax would be tacked on for some taxpayers and transactions.
As you can see, this tax would not hit the majority of real estate transactions that most taxpayers experience and so the amount of dollars raised from this is in question and can not substantially have an impact on the cost of health care. So why have it? Is looks and smells more like class warfare than a key component of the bill.
What do you think?