Letter to the Editor: Does the new Healthcare Bill require 3.8% tax on ALL real estate?

Recently a neighbor of mine, Barry, told me that life must be hard with the new tax that was being instituted under the Obama health care reform bill.  Puzzled, I asked him what he was referring to.  He said, to pay for the health care, the government would be instituting a 3.8% tax on all real estate.  Thinking that this sounded out of the norm, I popped over the snopes and to the NAR (National Association of Realtors) website and here's what I found:

iii. The Medicare Tax on Unearned Income

An article has been circulating around the internet claiming the recently passed health care legislation imposes a 3.8% tax on homes sales. The article fundamentally mis-characterizes and overstates what is actually contained in the legislation. The $250,000/$500,000 exclusion for the sale of a principal residence remains unchanged. Some individuals and families may be subject to a 3.8% tax on a portion of their unearned income. Unearned income includes interest, dividends, capital gains and net rents. The new tax will apply ONLY to for single filers with more than $200,000 of Adjusted Gross Income (AGI) and joint filers with more than AGI of $250,000.

The new Medicare tax would apply only to any gain realized that is more than the $250K/$500K existing primary home exclusion, and only if the seller has AGI above the $200K/$250K AGI thresholds. So, for example, if the taxable portion of a gain was $30,000 and a married couple had AGI (which would include the taxable gain) of $180,000, the 3.8% tax would not apply because AGI is less than $250,000. If that same couple had AGI of $290,000, then the application of the 3.8% tax would be subject to the same formula described above. The $30,000 gain on the sale would be less than the $40,000 excess above $250,000 AGI, so the $30,000 gain would be subject to the new 3.8% tax.

So, not too scary for most home owners.  However, just another reason for sellers in this situation to not transact real estate.  Elections are coming this November...have you registered to vote?  Visit ROCK THE VOTE now to get details.