A 3.8% Tax On Real Estate Sales As Part Of Obamacare?

August 17th, 2011

For quite a while I have heard rumors that so-called “Obamacare” was partly being paid for by a 3.8% increase in the capital gains tax on real estate. This is mostly not true. If you dig deep into the issue you will find it will not apply to most people. However, in principle, there is an increase in the capital gains tax on real estate for some wealthier folks.

The Patient Protection and Affordable Care Act (PPACA) will have numerous effects, and I will not debate the pros and cons here. However, the claim that the PPACA includes a tax on all real estate sales has misinformed some of us.

Washington Post contributor Benny Kass said he would “debunk” the “rumors” that “the health-care legislation Congress passed this year will impose a sales tax on all real estate sales.” He advised, “don’t believe the rumors.” But in fact the health-care law did include a new tax on real estate profits. I don’t know that he debunked what he claimed to, he could have explained a little further that this was mostly untrue, but also partly true for some of us.

It depends on the amount of your profits, if you have any profits; and it depends on your income level. The bill would impose what is essentially a capital gains taxes on some home sales made by a limited number of taxpayers. The health care law contains a new 3.8% tax on “unearned income” for high-income taxpayers. Unearned income includes capital gains.

So to me this is simply a slight increase in the capital gains tax on real estate sales/gains for some wealthier people. To be hit by the 3.8% capital gains tax, you have to be a married couple making more than $250,000 in adjusted gross income or $200,000 if you are single. Then the capital gain on the home sale must also exceed $250,000 if you are single, and $500,000 if you are a married couple.

I don’t think this is anything to get too hopped up about and attack, nor defend. It will not have any impact on the real estate market, and will only affect the finances of a select few. It is certainly something to be aware of, but it is not really a major story.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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One Response to “A 3.8% Tax On Real Estate Sales As Part Of Obamacare?”

  1. Clint Wilson says:

    Brian,

    Good read. In the Bay Area I bet most are not aware of this tax as if you came in ’99 when I did you would have a $250k gain on any home bought so that is quite a tax for a single person.

    Few would have a $500k gain as a married couple unless they bought pre-’99 here when prices were reasonable.

    ~Clint

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