The Truth About a 3.8% Tax on All Home Sales

The Truth About a 3.8% Tax on All Home Sales Christopher Galler, COO of Minneapolis Association of Realtors We're being flooded by calls and emails about whether the new Health Care Bill has a federal tax on the proceeds from the sale of your home. The statement goes something like this:

UNDER THE NEW HEALTH CARE BILL - DID YOU KNOW THAT ALL REAL ESTATE TRANSACTIONS ARE SUBJECT TO A 3.8% "SALES TAX"? IF YOU SELL YOUR $400,000 HOME, THIS WILL BE A $15,200 TAX. As with most things found circulating through the blog-o-sphere of our partisan world, this is not entirely true. It is also not entirely false. The new Health Care bill does include a new 3.8% tax on SOME high income earners ($200,000 single/$250,000 married) after the current capital gains exclusion of $250,000 for singles/$500,000 for married. You can review an accurate portrayal of the new tax at: http://www.factcheck.org/2010/04/a-38-percent-sales-tax-on-your-home Of real interest to REALTORS® is the willingness of government to look at housing benefits for tax revenue. In 2009, the Minnesota House of Representatives passed a bill calling for a significant reduction and redistribution of the Mortgage Interest Deduction and elimination of the property tax deduction in Minnesota. This bill was not accepted by the Senate. President Obama's Budget (not yet passed into law) includes a 5-year reduction in the Mortgage Interest Deduction at the federal level. And, as we noted above, there is an increase in the taxes paid for some homeowners in order to help fund the Health Care Bill. As demographics change and government looks for items to tax, real estate is no longer viewed as an untouchable cornerstone of the American Dream. Instead, government at the state and federal level is increasingly willing to chip away at real estate tax benefits. This strategy slowly erodes the benefits in a way that many don't realize until it is too late to stop. It reminds me of the story about cooking frogs. Toss a frog in boiling water and it will jump out, place a frog in a kettle of cool water and it will adapt as the temperature rises - even to its inevitable destruction. Let's not be frogs waiting to see what happens. Brokers should sign up for the Broker Involvement Program: http://www.realtoractioncenter.com/realtors/brokers, and everyone needs to respond to "Calls for Action". A PDF flyer you can distribute to your clients or concerned consumers is available to download at REALTOR.org.   Minnesota Homes for Sale Short Sale Information