Myth of the “3.8% real estate sales tax”

This seems to keep coming up — the MYTH that “Obamacare” includes a provision that imposes a sales tax or a transfer tax on all home sales.  A client forwarded the infamous email to me just a few weeks ago and I sent an explanation. This morning, I was reminded again by a LinkedIn post from Heather Elias, of the National Association of REALTORS(R). Here is the important excerpt from her message:

“The tax is NOT a transfer tax on real estate sales and similar transactions.

“It’s a tax on a very narrow band of investment income for high-wealth households (those who earn $250,000 in a joint return or $200,000 as an individual) that could come into play on the sale of a house if the sales gain is more than $500,000 for a married couple or $250,000 for an individual.

“Even in the unlikely event the sales gain is more than that amount, the tax would only apply based on other considerations having to with the household’s income and its tax situation.”

The Affordable Care Act DOES include an expansion of capital gains taxes of all kinds — profits on the sale of stocks, bonds, real estate, and most capital assets.  It absolutely does NOT impose a tax of $3,800 on every sale of a $100,000 home!!!!!

One of several scenarios presented in a brochure from NAR describes a couple with taxable income of $325,000 before the sale of their home.  On top of that, they sell their home for a profit of $525,000 — increasing their income tax liability by $950!

If you’re interested in more details and more sample scenarios, download the brochure.

My point here is NOT to defend the Affordable Care Act, or any tax increase, but this myth seems to have nine lives.  I hope this helps to spread the truth.