Yes, a tax. But not a sales tax.
Heather Elias
![Heather Elias]()
Heather Elias
20+ years of real estate industry experience from boots on the street to the C suite
Last week, I wrote a post here about the 3.8% tax that is part of the Health Care Reform Act, which passed in 2010. There have been numerous emails circulating that mischaracterized how the tax worked, and here at NAR we wanted to help people understand it better. The post created a flurry of comments, and I thought we would address some of the points raised directly. (I'm taking some of my clarification points directly from The Top 10 Things You Need to Know about the 3.8% Tax.)
- Yes, it is a tax. But it's not a sales tax, it's a tax on investment income.
- No, NAR does not support this tax. It was added into the health care law at the last minute and was never considered in hearings.The tax will no doubt be debated during the upcoming tax reform debates in 2013.
- When you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will NOT be subject to this tax.
- For the tax to apply to any profit or gain on a primary home sale, the profit/gain must be more than the $250,000-$500,000 capital gains exclusion that’s in effect today. That’s gain, not sales price.
- The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).
- If you are concerned that this tax may apply to you, please consult your tax advisor.
- NAR is nonpartisan and does not get involved in presidential politics.
Here is a video with NAR's director of tax policy, Linda Goold, that does a very good job of explaining:
And here are some more resources that could help explain:
- Top 10 Things You Need to Know about the 3.8% Tax
- 3.8% Tax: What's True, What's Not
- The 3.8% Tax is Not A Real Estate Transfer Tax
- Washington Post: Health-care law’s 3.8 percent surtax will not affect many home sellers
Cheers,
Heather
Sales Associate at Remax Around Atlanta
12 年Dottie G. Karen is misinformed or uninformed. Obama ignored the recommendations of the bipartisan committe to find cuts to gov't. spending, even though he initiation the formation of such a committee. Also, Karen, Obama & Sen.from Nevada demonize any proposals or spending cuts initiated by Republicans. The 3.8% tax is a sneaky, underhanded way to raise capital gains tax by hiding the tax in the abysmal health care act.
Founder West World Properties, LLC Associate Broker
12 年Thank you very much for share this article, you did a great job of explaining a complex topic.
Independent Real Estate Professional
12 年I went and listened to Ralph Nader in Palo Alto, Ca 2 weeks ago (keeping an open mind and listening fairly to all). He stated in all of Canada the Health care plan is 26 pages long. Romney's I hear was about 30. Obama's? started at over 900 pages and Nader stated now is 2200 pages! Repeal it or will be paying more for less with bigger government.
Principal Camvest, LP
12 年Interesting analysis Karen, but what does that have to do with the 3.8% surtax on investment income to finance Obamacare? I guess if you think higher taxes and redistribution of income is the way to improve the economy then you should vote for Obama.
Realtor/Realty South-Cahaba Rd Mountain Brook, Al
12 年Obama did not hurt the realtors the inflation of home prices and the banks that encouraged buyers to get loans either when purchasing a home or after the fact that were adjustable and could go to 7% or higher are the most guilty. Also I have had many buyers that I encouraged not to get anything other than a fixed rate later go refinance with Bank of America, Country Wide, Chase and a few others and get into a horrible mess. On top of that we all know that for a while people were increasing the value on a home that had new paint and new appliances in large increments. It was a good ride for many but we all are paying the price for that. I for one have seen things improve under Obama this past year or two in home sales and stock market as well, it is a known fact that if you research stock market that your stocks usually made more during a democratic term. Most people I sell for don't make $250K profit on home. If they do the tax is not going to kill them. The banks needed some control over them and they are still making plenty of money on our money. The stock market needed some guidelines too. The problem with much of Obama's term is the stubborness of Republicians to not try to work with him on anything that has been put before them, even when a committee of Republicans and Democrats offered suggestions they decided to do nothing. I call it the do nothing congress. Romney says he worked with the democrats and Republicans when governor but that is not entirely the case, Ted Kennedy helped get the healthcare worked thru in Mass. then Romney signed it off. Due to Ted Kennedy the bill was worked out. Also Democrats of the old school and Republicans used to work with each other rather than against each other.