Tax On Home Sales
Under the new health care bill, there is language that is going to cause some people to have to pay sales tax when they sell a home. When the new law was passed back in March, most people heard about the 3.8% Medicare tax, but most did not see the connection to a tax on home sales and how it would impact most Americans after it is implemented in 2013.
In an article published by the Spokane Spokesman-Review back in March (click on picture on the right to enlarge), Paul Guppy claimed that a 3.8% tax on all home sales was going to be implemented on January 1, 2013 as part of the new legislation.
This is not really true. As a matter of fact, it is barely based upon the truth, but it makes great fodder for email evangelists who trade gossip and half-truths in heavy volume around the world.
I recently received an email from "Lenny" who wondered if any of the following were true. The email claimed:
Here is a change we will get..........
Make plans to sell you house prior to January 1, 2013. King Obama is going rape your bank account before you realize it. Under the new health care bill--- did you know that all real estate transactions are subject to a 3.8% Sales Tax?
You can thank Nancy, Harry, Barack and your local Democrat Congressman for this one. If you sell your $200,000 home, this will be a $7,600 tax. Read [article above] and scroll across to read it all.
The timing of this question is somewhat ironic, as we have been analyzing our falling real estate values fairly often of late. The reality is that this new law addresses "profits" and "gains" far beyond what 99.9% of Americans are going to be receiving over the next ten years.
The fact is that most people who sell their home will not be impacted by this new law, it is NOT a new tax on every sale and only affects people who are "high earners," meaning they make over $250K per year. But even if you are in that group, you would need to have seriously huge gain on the sale of your home before a part of it would be subject to this tax.
Remember, the first $500K of capital gains on a home sale is sheltered for married couples, so the 3.8% tax would apply to the gain above that amount. How many Tallahassee homeowners are in a position to profit more than $500K on the sale of their home? Considering less than 3% of the homes in Tallahassee could even sell for an amount above $500K, I really think we can consider this tax as the least of our worries in the housing market.
Around the country, home values are dropping. Worrying about a tax on a huge gain of your home sale would be a great worry for most homeowners. The article that was written was published in error and we can (hopefully) put this issue to rest.
If you do happen to receive an email on this issue, just point them to this article and tell them not to worry!
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