Separating Internet myth from reality:
There is no national 4-percent tax on all home sales
In recent months numerous e-mails have circulated regarding a national transfer tax on home sales. One such e-mail was circulated regarding a “national real estate transfer tax,” which contained false information from the Spokane, Washington, Spokesman-Review.
MYTH
President Barack Obama’s health care bill contains a 4-percent “transfer tax” on all home sales.
FACTAccording to FACTCHECK.org, most home sellers will not have to pay any such tax. The health care bill includes a provision that imposes a 3.8-percent Medicare tax for some high-income households that have “net investment income.” Revenue collected by this tax is dedicated to the Medicare hospital insurance program.
The tax applies to households with an Adjusted Gross Income (AGI) of more than $200,000 for individuals or more than $250,000 for married couples. An additional tax obligation may result from the sale of real property because capital gains are included in the definition of net investment income.MYTH
President Barack Obama’s health care bill contains a 4-percent “transfer tax” on all home sales.
FACTAccording to FACTCHECK.org, most home sellers will not have to pay any such tax. The health care bill includes a provision that imposes a 3.8-percent Medicare tax for some high-income households that have “net investment income.” Revenue collected by this tax is dedicated to the Medicare hospital insurance program.
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 - $250,000 (individual)/ $500,000 (couple). If the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid. The new Medicare tax would apply only to a home sale gain realized in excess of the $250,000/$500,000 that pushes the AGI over the $200,000/$250,000 income limits.
Please keep in mind that the annual median sales price in New York State in 2009 was $199,000, and only about 6.1% of households in New York State in 2009 made more than $200,000, according to U.S. Census Bureau data. This means that the Medicare tax would likely only affect a very small percentage of New Yorkers once it goes into effect on January 1, 2013.
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