Plenty of rumors were spread during the election. Now that the dust has settled, we can start separating what was fact from what was fiction. One rumor in particular had myself and fellow Realtors concerned, the rumor of a 3.8% real estate transfer tax included in the Obamacare bill going into effect on January 1, 2013. If true, this would indeed affect many people. Fortunately, it is has been completely misunderstood and will not impact 97% of real estate transactions. In fact, it is wrong to call it a real estate transfer tax. It is a capital gains tax.
This video from the National Association of Realtors, addresses some of the rumors and explains how and when this tax will come into play.
Here are the basic facts:
- The new 3.8% tax increase is to help Medicare and goes into the Social Security Trust.
- The tax only applies to individuals that makes over $200,000 a year or couples that make over $250,000 a year.
- Sales of primary residences can still take advantage of the $500,000 capital gains exclusion, but the tax will apply to anything above that cap.
- Any capital gains on non-primary residences (investment properties, second homes, ect.) will be subject to the tax if the owner’s income exceeds the limits previously mentioned.
Working in a bustling city, many of my clients own investment properties and pied-à-terres throughout the downtown neighborhoods. If you feel you will be affected by this new tax, please consult a tax or financial consultant to learn exactly how.