Is There Really a 3.8 Percent Home Sales Tax in 2013?

US Federal Tax FormsThis question continues to arrive in my email box with a number of clients concerned that the new healthcare legislation imposes a 3.8 percent transfer tax on all homes sold after 2013.

According to the National Association of REALTORS® (NAR),

The 3.8% tax is imposed ONLY on  those with more than $200,000 of Adjusted Gross Income (AGI) ($250,000 on a joint return).  The tax applies to investment income, defined as interest, dividends, capital gains and net rents.  These items are all included in an individual’s AGI.  A formula will determine what portion, if any, of these types of investment income would be subject to the tax.

NAR also states that this is not a transfer tax on real estate sales and that the new tax does NOT eliminate the benefits of the $250,000/$500,000 exclusion on the sale of a principal residence.  Thus, ONLY that portion of a gain above those thresholds is included in AGI and could be subject to the tax.

So while there is a new tax in the healthcare law, it is not a transfer tax and will not apply to all sellers of real estate. Sellers are encouraged to discuss their particular circumstances with a CPA or their tax preparer prior to listing their homes for sale.  

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