Last year my husband and I were getting ready to sell our house and buy another house. About that time, we read on the Internet that because of ObamaCare there would be a 3.8% sales tax on ALL real estate transactions.
I immediately became concerned. Then I started thinking about it logically. What would that do to the real estate market? How could the average homeowner afford to move? The tax didn’t make sense.
It was time to talk with real estate agents and do more research on the Internet. The information I found on Snopes.com is: the Patient Protective Affordable Care Act, also known as Obamacare, created a new tax code that imposes a 3.8 percent tax on the lesser of “net investment income” or the excess of modified adjusted gross income over a “threshold amount” (generally, $250,000 for taxpayers filing a joint return, $125,000 for married taxpayers filing a separate return and $200,000 for all other cases)… Go to Snopes.com to read all of the code.
Many people have been confused by the code and have said that the 3.8% Medicare tax is on ALL real estate transactions. Snopes.com says this is incorrect: “the Medicare tax is not a sales tax, nor does it apply to all real estate transactions; it is a tax on investment income (income which may or not derive from the sale of property) only for persons who earn more than the amounts specified in the bill.”
Snopes gives a good example. A couple with an income of $325,000 bought a house for $300,000 and later sold it for $850,000, making $550,000 profit. The law allows the couple to exclude $500,000 of gross income profits of their principal residence. That leaves $50,000 the couple would have to pay on for the 3.8% Medicare tax.
Basically, the reality is that the average homeowners will not have to pay the 3.8% Medicare tax when they sell their house.
Because tax laws change, if you are selling a house, contact your Certified Public Accountant before making any decisions. Make sure you are proceeding in the best way for you financially.