New 3.8% sales tax on real estate

Is there a new 3.8% sales tax on real estate transactions?

Here is your answer according to the National Association of Realtors…

Q: Is there a 3.8% real estate “sales tax” or a transfer tax created in health care bill?

A: No. There is neither a real estate “sales tax” nor a real estate transfer tax under any federal law. The Internet has generated several viral items describing such a tax. Those Internet postings are totally false. The 2010 health care legislation did create a new 3.8% tax, but it applies only to a limited group of taxpayers.

Q: So who will be subject to the new tax? When is it effective?

A: The new 3.8% tax will apply to the “unearned” income of “High Income” taxpayers. The new Medicare tax on unearned income will take effect January 1, 2013. Proceeds from the tax will be allocated to shoring up the Medicare fund.

Q: Who is a “High Income” Taxpayer?

A: Those whose tax filing status is “single” will be subject to the new unearned income taxes if they have Adjusted Gross Income (AGI) of more than $200,000. Married couples filing a joint return with AGI of more than $250,000 will also be subject to the new tax. (The AGI threshold for married filing separate returns is $125,000.)

There are many more answers to questions on the Realtor Association’s FAQ page.

It may not be a “sales tax” as indicated in the emails being sent around the internet, and it may not be as dramatic as stated in those emails that are clearly trying to influence votes.  But it certainly is a new tax that will need to be taken into consideration for some people.

It would be very beneficial to check with your tax professional.  Depending on your gains and how your investment is structured, this new 3.8% may apply to you.