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Sold ... But Taxed?
I read an article that stated the Health Bill includes a provision whereby, after 2012, a 3.8-percent sales tax will be imposed on the sale of all houses. Any truth to this?
A tax on all home sales? No. A tax on a small number of upper-income home sales? Yes.
According to the National Association of Realtors, “this WILL NOT not be imposed on all real estate transactions, a common misconception. Rather, when the legislation becomes eﬀective in 2013, it may impose a 3.8-percent tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses). The tax will fall only on individuals with an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI.”
According to the IRS, in 2008 it received 142.4 million tax returns. Of these, 3.1 percent were from filers with an AGI of more than $200,000. Of these high-income filers, 27,399 paid no federal income tax, and few will pay the new 3.8-percent tax.
The tax itself does not apply to earned income from paychecks but may instead be applied to interest, dividends, rents and capital gains. These are forms of income on which individuals do not pay Social Security taxes.
The NAR provides an example of how the tax might work: A couple has an income of $350,000 after all deductions. They sell their home and have a $525,000 profit. The first $500,000 in profit from the sale of a prime residence by a married couple is tax-free. That means $25,000 can be taxed. Their tax increases under the new rule by $950 ($25,000 x 3.8 percent).
So, would this tax apply to you or me? Not likely. According to the U.S. Census Bureau, real median household income totaled $49,445 in 2010 – that’s a 7.1-percent decline from 2001. For specifics, see a tax professional.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to email@example.com.View Foreclosure Article Archives
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