3.8% Tax: What’s True, What’s Not

Rumors have been circulating on the Internet about the law that contains a 3.8 percent tax on real estate.  NAR released material to show that the tax doesn’t target real estate and will in fact affect very few home sales, because it’s a tax that will only affect high-income households that realize a substantial gain on an asset sale, including on a home sale, once other factors are taken into account.  Maybe 2-3 percent of home sellers will be affected.

The tax will affect few home sellers because so many different pieces must fall into place a certain way for the tax to apply.  First, any home sale gain must be more than the $250,000-$500,000  capital gains exclusion that’s in effect today.  That’s gain, not sales amount, so you really have to reap a substantial amount for the tax to even come into play.  Very few people are walking away with a gain of more than a half a million dollars today, even in the high-end home market.

The other thing about the tax worth noting is that, although it takes effect in 2013, any impact on taxes wouldn’t happen until 2014.  That’s because the tax filer would do the calculation in 2014 for the 2013 tax year. Because it’s not a tax on a real estate sale but rather on a CAPITAL GAIN, it’s not calculated at the time of an asset sale, whether that asset is a house or something else.  It’s calculated at the time the filer

Tax (Photo credit: 401(K) 2012)

figures his or her tax.

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