RE/MAX Fine Homes - Orange County Real Estate Blog: September 2010

Dispelling the Myth about the 4.0% "Sales Tax"

Submitted by Sasan Aval, Canaday Group Agent:

An opinion piece in the  Spokane, Wash., Spokesman-Review last month FALSELY reported that the health care bill contained a provision for a 4.0 percent “sales tax” or “transfer tax” on the sale of a home.
 
Let us sum up: The health bill included a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have “net investment income.” Any revenue collected by the tax is dedicated to the Medicare hospital insurance program.
 
This new tax applies only to households with Adjusted Gross Income (AGI) of more than $200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property. Even if the AGI limits are met, the new tax would not be applied to capital gains that result from the sale of a home, since the existing home sale capital gains exclusion rule still applies – $250,000 (individual)/$500,000 (couple). So if the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid on the gain. The new Medicare tax would apply only to a home sale gain realized in excess of the $250K/$500K that pushes the filer’s AGI over the $200K/$250K income limits.
 
Some other quick points:
• The new Medicare tax will take effect January 1, 2013.
• The legislation makes no changes to the mortgage interest deduction.
 

Comment balloon 0 commentsLee Ann Canaday • September 29 2010 07:40PM
Dispelling the Myth about the 4. 0% "Sales Tax"
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Submitted by Sasan Aval, Canaday Group Agent: An opinion piece in the Spokane, Wash., Spokesman-Review last month FALSELY reported that the health care bill contained a provision for a 4. 0 percent “sales tax” or “transfer tax” on the sale of… more
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