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Government Affairs, NAR‘Average’ homeowner not affected by health-care tax
There are lots of rumors, e-mails and blogs about the new health-care legislation passed earlier this year.
PAR has been hearing from members who are concerned about a portion of the law that outlines ways in which the insurance will be funded, including a tax on the profits from real estate sales.
In talking to representatives from the National Association of REALTORS®, we’ve found that the tax is directed at high-income taxpayers and will have no impact on the vast majority of homebuyers.
The Health Care and Education Reconciliation Act of 2010 levies a 3.8 percent tax on the profits from the sale of real estate, residential or investment. The average taxpayer would not be affected by this tax.
Anyone with an adjusted gross income of less than $200,000 is exempt from the law. The law will apply to married couples who file a joint return if their income is more than $250,000. (It was estimated that approximately 3 percent of U.S. taxpayers fell into this category in 2009.)
Only the sales of homes that have a “net investment income” would be considered under this tax. The existing home sale capital gains exclusion rule still applies. According to NAR, the new Medicare tax would only apply to a home sale gain realized in excess of the $250,000/$500,000 that pushes the taxpayer’s adjusted gross income over the $200,000/$250,000 income limits.
The Washington Post recently ran an article outlining how the tax would be calculated. Author Benny L. Kass gives several scenarios of how the tax would be calculated for those who fall within the income/profit guidelines.
NAR’s Myth Busters and its FAQs provides REALTORS® with additional information on the tax provisions. For specific details, consult your tax advisor.
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About PAR Staff: The Pennsylvania Association of REALTORS® is a trade/professional association that serves as the “voice for real estate®” in the Commonwealth of Pennsylvania for its more than 30,000 members. |
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Matt — the tax is levied on all “unearned net investment income” whether from real estate or other investments such as capital gains from stocks or bonds, dividends, or interest income beginning in 2013.
That of course doesn’t make it more palatable for high-income real estate investors or homeowners realizing a very large capital gain, but it is important to note that it does not treat real estate investment activity differently than other types of investment.
Is this the first time that a “National Real Estate Tax” is being assessed. I must say that I have not heard of one in the past, which is not to say it has not existed. If this is the first time this has happened, it is a dangerous milestone when everything is becoming nationalized and then run so irresponsibly and unresponsively as to endanger our entire Republic. Are we still the United States of America?
Very good article. Weather someone agrees or disagrees with the bill, there have been rumors all over about how many people would be taxed, and the fact is if you are one of the 97% making under 200K, the tax will not apply to you. Thank you PAR for clarifying this.
Great facts from PAR about what the so-called Medicare Tax actually entails.
In fact, NAR sent a letter (http://bit.ly/cakHlw) to the full House of Representatives when the tax was introduced expressing “in the strongest possible terms our opposition to the proposal” and did not support this measure in any way.
However, in spite of our opposition, this tax is now signed into law and will take effect in 2013. It’s important that REALTORS® and homeowners alike understand what this tax does and does not entail.
—————————————
Chris Gosselin
Political Representative
CT, GA, MA, ME, NC, NH, PA, RI, SC & VT
National Association of REALTORS®
500 New Jersey Ave NW
Washington, DC 20001
cgosselin -at- realtors.org
This is a TAX on real estate and we should all say NO! The tone of this article is appalling and I can not believe that it was written by a group purporting to be the “voice for real estate” – sounds more like the “voice for government health care”. The suggestion that we should accept a new tax because it will not affect the “Average” homeowner is dangerous and insulting to our intelligence. I do not work in an average market and many of our clients fall above the “average” threshold – a threshold that will change as health care costs increase and more taxes are needed to fund the program. New taxes will only go up and income thresholds will go down. Get a clue – this is a new tax affecting real estate transactions and PAR should not be supporting it or suggesting that we not worry. We should be even more worried because PAR isn’t worried!
How will this new tax affect vacation homes which are not your primary residence. WIth the apprciation of vacation homes, the sale will probably throw your agi(adjusted gross Income) over the 200,000 mark.
Taxing the “rich” to continue to prop up the overspending of the federal government is extremely dangerous. Watch as time goes on the “rich” will have less and joblessness will create more poor and this nation will be bankrupt.
Personally, I am tired of working long, hard hours to support those who sit on their porches and cash their government checks as the migrant workers come into the country to do the jobs “no one wants to do”. Enough is Enough! This health care bill will be a very bitter pill to swallow.