Have you heard about a 3.8 percent tax on the sale of your home that takes effect next year? You know, the tax that was hidden in the health care legislation two years ago to help pay for reforms?
According to warnings spread by email and the Internet, the tax equates to a $3,800 fee on a $100,000 home beginning in 2013.
It turns out, though, these rumors are, well, just rumors. For most homeowners, there will be no impact whatsoever.
While many organizations, including the National Association of Realtors and Factcheck.org, have tried to squash misinformation, widespread concern about an impending flat tax on home sales continues to circulate. The Post-Star has even received emails asking about it.
Here’s where the facts have been twisted:
There is a tax, but it’s on investment income for high-wealth households that reap an extraordinarily large profit from the sale of a home.
The tax is limited to couples who earn $250,000 a year or individuals who earn $200,000. And it only comes into play when the sale generates more than $500,000 in profit for a married couple or $250,000 for an individual.
The National Association of Realtors says even in the unlikely event of a profit that large, there are still other considerations having to with the household’s income and tax situation before it would apply.
“The bottom line is, the tax, which was imposed to help shore up Medicare, will only hit some portion of investment income,” the group says.
While the impact is very limited, the Greater Capital Association of Realtors says it continues to field calls from worried homeowners.
“We hear from our members all the time, although for last two years we have been publishing information that it’s a myth,” said Jim Ader, the group’s CEO. “Somebody who is in the market, surfing the Internet, sees this and gets all upset.”
According to Ader, sales resulting in a profit of $500,000 or more are unusual in the greater Capital Region. He said the law may have a bigger impact downstate, where a larger percentage of homes are in the million-dollar range.
Ader also clarified that it’s not a sales tax, which generally is paid by the buyer.
The National Association of Realtors has published a brochure on the tax and how it works; it can be found at http://bit.ly/bhS8H6.
The association has advised Realtors against coaching their clients on the tax because there are so many individual factors to consider.