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I read “The 3.8% Tax Real Estate Scenarios & Examoles” and have a question about aplication. I saw nothing that addressed a couple or more likely a single retired person who is selling their principal residence and who has a retirement income of less than $200K. This is a likely scenario for thousands of people who bought homes years ago and are down sizing. Does this 3.8% tax apply to them?
Jack Gelke
John, let me reply based on my understanding but you’ll want to get a definitive answer from a qualified tax professional. If the individual’s adjusted gross income (AGI) is under $200,000, then they wouldn’t be subject to the 3.8 percent tax on investment income, even if they sold their house and realized a gain of $250,000 or more. To be subject to the tax, they have to have an AGI of $200,000 at a minimum. If they don’t meet that threshold, then the fact that they sold their house for $250,000 or more isn’t an issue. The same applies to a married couple, although the numbers change. If the couple together has an AGI of under $250,000, then they wouldn’t be subject to the tax even if they sold their home for a gain of $500,000 (that’s gain, not sales price). But you need to verify that with a qualified tax professional.
I wonder if your organization is aware that a political group is using your organization to promote misinformation on the 3.8% tax in the Affordable Care Act? The link used is: http://www.gop.gov/blog/10/04/08/obamacare-flatlines-obamacare-taxes-home ? The information in the email I received says that ALL sales of homes will be subject to this tax, and makes it sound like retirees are being targeted. But worst of all, to me, they are referencing your organization as “not pleased with this new tax,” and “working to get it repealed…”
That point of view doesn’t appear on your website as far as I can tell.
Thanks for your note. You’re correct that NAR is not working to get the provision repealed. NAR has developed material to help real estate proferssionals understand how the tax works, but it is not advocating for its repeal. If you’d like some info on how it works, you can find a video, FAQ, brochure, and bullet points on it at this link: http://www.realtor.org/articles/new-summary-explains-the-38-tax Thanks again for your note.