Reminder: 3.8% Tax to have Minimal Real Estate Impact

Tax time is nearing and once more rumors are circulating on the Internet and by e-mail that the health care reform law enacted two years ago includes a 3.8 percent transfer tax on real estate starting in 2013. That rumor is not true and NAR has material available to explain how that 3.8 percent tax works.

It’s a tax on a very narrow band of investment income for high-wealth households (those who earn $250,000 in a joint return or $200,000 as an individual) that could come into play on the sale of a house if the sales gain is more than $500,000 for a married couple or $250,000 for an individual.

Even in the unlikely event the sales gain is more than that amount, the tax would only apply based on other considerations having to with the household’s income and its tax situation.

The bottom line is, the tax, which was imposed to help shore up Medicare, will only hit some portion of investment income.

Video and explanatory article.

Free downloadable brochure.


Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at

More Posts

  1. Brett Binkley

    A tax is a tax is a…who cares if its “a very narrow band of investment income for high-wealth households”–plainly we are all overtaxed and ALL Washington Politicians need to cut spending. Please don’t downplay or try and justify a new tax to fund our bloated bureaucracy.

  2. Roland

    Brett, nobody is downplaying the tax. All the article does is explaining how it only affects very few people contrary to what some people believe. It is nothing to cause mass hysterie since it doesn’t apply to most transactions. The few people that are affected should already have knowlegable, professional help from cpas and lawyers. Average Joe has nothing to fear (this time). Abd that is all the article says.

  3. Jim Thorpe

    Call it the way it is. It is a tax on a real estate transaction if the formula determines an amount. Will not affect very many right now but what about in the future if values of homes increase and hopefully our incomes increase?

  4. Kim Rolls

    What folks seem to fail to notice is that taxes on a new segment of the economy have a way of expanding. For example the “Sin Tax” on tobacco products — great idea – use the money in health related programs – but — result – less tobacco products consumed – income from the tax declines – programs still in place need additional funding from other sources to make up the short fall – result more taxes on other products and the cycle continues.
    Now you begin to tax this “limited” segment of the real estate market – result – that segment retreats resulting in less income available to those involved in marketing those properties – less disposable income entering the marketplace – economy.
    Tax income then is not sufficient or as projected and govenment expands the tax to a larger segment and the cycle will continue until all real estate transactions will be taxed and the economy eventually suffers the consequences and then government goes on the hunt for new sources of income – a hungry beast that demands feeding.
    Government meddling in the marketplace is the cause of the real estate mess we are working out way through now. And every government “fix” has failed and made things substantially worse. As Reagan once said – Government is not the solution to the problem — it is the problem. We need a free market without the interference of those you have never participated in the marketplace.
    It’s the idea of getting one’s foot in the door. The wolf guarding the henhouse

  5. This tax is already being paid by the working class that work their 9-5 jobs and bring home a paycheck each week. It doesn’t matter if they make $10,000 a year or $250,000 a year – they pay a “medicare tax”. Now the same tax is being applied to capital gains, the money money made from investments, stocks, bonds, selling real estate, etc. Medicare is for the elderly with no other form of health insurance. This really has nothing to do with the presidents healthcare mandate. Medicare has been around for decades.
    Why do people get so up in arms about EVERYBODY paying the same rate of taxes? Two words — Class Warfare — a catchy phrase made up by Republicans.

  6. Mary

    Bret, I’m proud to be an American and proud to pay my fair share.
    I consider paying tax’s just as patriotic as fighting for your country.
    I look at my communities, and am proud. I drive on our hiways I am protected and free. And that doesn’t come free.

  7. This is a great information push by the NAR, but we should be careful to not overstep. Let’s not terms like “unlikely” when describing potential tax liability or “high wealth households” (which describes assets, not income). They sound like politics as opposed to an objective analysis.

    This is certainly not a 3.8% transfer tax, but it is a tax that is associated with a real estate transaction. It will affect very few, but is specifically levied based on real estate gains, so we shouldn’t disassociate it from real estate.

  8. Joe

    A tax is a tax no matter how you push it through a calculator. This is a NEW tax which will no doubt be expanded and increased. A tax you did not have to pay for before.

  9. Beth

    Sure, Joe, it’s a tax that INVESTORS didn’t have to pay for before. However, we working stiffs have paid it all along, as Carolyn describes above. People who float their cash for a living have been the “free riders” in this system, where they don’t pay in but are still eligible for the benefits that we worker-bees pay for. It’s time they start pulling their share of the load.