There is a rumor going around that a 4% sales tax (beginning in 2012) on real estate transactions will aid in the funding of the new health care reform. The truth is NO, there will NOT be a sales tax on real estate transactions; however, there will be a 3.8% tax on investment income above certain limits.
This tax will apply under these circumstances:
- An individual has adjusted gross income of over $200,000 ($250,000 for a couple)
- Gains in the sale of a primary residence in excess of the exemptions already in place, which are $250,000 for an individual and $500,000 for a couple. In this case, the tax applies only to the amount exceeding these limits.
Both of these points would have to be true in order to pay the tax. Here’s an example:
If a couple sold a house and had a gain (not sales price) of $600,000 and they exceed the income limits for the year, they would pay 3.8% tax on $100,000 ($600,000 – $500,000 exemption), or $3,800. This tax would go to fund Medicare.
This new Medicare tax will not take effect until January 1, 2013.
This can be a confusing issue, so please comment with any questions!
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A very religious person told me, “My pastor told me that Obama wants to give 4% of the value of my house to illegals.” That’s how it drips out of the bottom of the trough.
Will, I hate to pass the buck, but this question is outside of a Realtor’s area of expertise! I highly recommend you consult with a tax attorney. I highly recommend Mac Nichols at Layman & Nichols. His office number is 540-433-2121.
My question has to do with a couple who have done some estate planning and one of them is the owner of the property in question yet they file a joint income tax. Does this make a difference in the exemption as you have described it?