Recently, one of your OCAR bloggers received a panicked email from her mother. “If I sell my house, I have to pay a 3.8% tax on it?” read the opening line from Mom. And below it, the pernicious email read something like this:
Did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That’s $3,800 on a $100,000 home, etc. When did this happen? It’s in the health care bill and goes into effect in 2013.
Because of the exasperation that this email caused, this message made its way to Snopes.com, the trusted source for busting Internet hoaxes. However, our old-reliable source for debunking legislative and policy misconceptions is the National Association of REALTORS®.
Here’s the scoop: the new law only applies to SOME investment income, which may include SOME real estate transactions. It won’t be applied on ALL real estate transactions–and it’s not based on the full-sales price of the home like a sales or transfer tax. When it goes into effect in 2013, it will apply to individuals with an adjusted gross income of $200,000+ or couples with an adjusted gross income of $250,000 and above. The types of income affected include: interest, dividends, rents (less expenses), capital gains (less capital losses).
Here are a couple of scenarios to help illustrate the new law’s application (excerpted from the National Association of REALTORS® “The 3.8% Tax Real Estate Scenarios & Examples”):
Get the full PDF informational booklet to review and share with your clients (and your Mom) –you are, afterall, their trusted advisor– go to work calming their fears! For specific help on your tax scenario, please consult a tax expert (nothing in this post constitutes legal or tax advice, but is for informational purposes only!).