3.8% Medicare Tax - Do you know how this affects real estate?

By
Real Estate Agent with Joy Daniels Real Estate Group, Ltd.

We have often shared "spam" messages that we receive.  I recently received this one but it wasn't a typical "spam" type, but definitely one that seemed misguided.  Because I personally had never heard of a real estate sales tax, I thought rather than ignore this email, I would check with my (stellar) accountant.   This is a lesson in RESEARCHING the facts and NOT believing everything you see on TV or receive via mail or email. 

HERE IS THE "MISGUIDED EMAIL":  

 

The National Association of Realtors is all over this and working to get it repealed, -- before it takes effect. But, I am very pleased we aren't the only ones who know about this ploy to steal billions from unsuspecting homeowners. How many realtors do you think will vote Democratic in 2012?

Did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That's $3,800 on a $100,000 home, etc. When did this happen? It's in the health care bill, -- and it goes into effect in 2013. Why 2013? Could it be so that it doesn't come to light until after the 2012 elections? So, this is â change you can believe in?

Under the new health care bill all real estate transactions will be subject to a 3.8% sales tax.

If you sell a $400,000 home, there will be a $15,200 tax. This bill is set to screw the retiring generation, -- who often downsize their homes. Does this make your November, 2012 vote more important?
 
 

HERE IS MY ACCOUNTANT'S RESPONSE: 

 

This is about the 3.8% Medicare Tax that is in the Healthcare Act.  It is intended to be a tax for people with incomes over $250,000.It does go into effect next year.   The tax is based on unearned income (interest, dividends and capital gains mostly) that are taxed.   Our understanding of the tax is that if the taxpayer would normally pay tax on this unearned income and they are over $250,000 in total income, then the tax would kick in.  Typically the sale of a principal residence isn’t taxed so the “new” tax wouldn’t apply.  It could however apply to someone who is holding the property for investment purposes.   If that is the case the gain would be taxable, not the sales price.  

 

If you are in the Central Pennsylvania area and are looking for a reliable, wise, kind and dependable accountant.  I would strongly suggest:

 

Stephen P. Gift, CPA, CFP®, PFS
Managing Member
Gift and Associates, LLC
1205 Manor Drive, Suite 100
Mechanicsburg, PA 17055-4894
717.766.3555
888.999.6936 toll free
717.766.4005 fax

 

Posted by

Joy

Joy Daniels, GRI, ABR, CSP, e-PRO
JOY DANIELS REAL ESTATE GROUP, LTD
2793 Old Post Road, Suite 200
Harrisburg, PA  17110

(717) 695-3177  office - Call TODAY and let me help you find your dream home!

www.joydaniels.com

Joy@JoyDaniels.com - Email TODAY and let me help you find your dream home!

What is your home worth?  Find out at MLS Market Snapshot

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Erica Ramus 09/17/2012 09:17 AM
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Ambassador
1,663,850
Richard Weisser
Better Homes and Gardens Real Estate Metro Brokers - Newnan, GA
Richard Weisser Coweta Newnan Homes for Sale

The fact is, it IS a new tax and it does apply to capital gains, INCLUDING the gain on the sale of non-exempt personal and real property so it is more truth than fiction.

Sep 16, 2012 06:26 PM #14
Rainmaker
601,438
Joy Daniels
Joy Daniels Real Estate Group, Ltd. - Harrisburg, PA

Richard I only know what my accountant told me abou this "sales tax" and the email made it sound much worse that he explained it to me.

 

Wow Donough, you gave a great explanation of this email that is obvioulsy making the rounds.  I read your post.  I hope others see your link and read your post.  Thank for your feedback.

Sep 16, 2012 06:34 PM #16
Rainmaker
578,918
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

Once a tax slips in the door it will be extended until it covers everything. Right now it is: Why should I care it only applies to the 'rich'. Next it will apply to the sort of rich, then the middle class then to every real estate transaction.

Sep 16, 2012 06:49 PM #17
Rainmaker
601,438
Joy Daniels
Joy Daniels Real Estate Group, Ltd. - Harrisburg, PA

It is a very hard pill to swallow I agree Than. I think a big part of that is not understanding.  Thanks for sharing. 

Sep 16, 2012 07:58 PM #18
Rainmaker
37,546
Ron Bibler
EXCELLENCE EXTERMINATING / EXCELLENCE HOME/BULDG INSPECTION - Healdsburg, CA

This is like the KING has new clothes...  Joy you act as if the is no big deal...Im kind-a-like in shock...

As Richard pointed it out very clear...IT A NEW TAX... and its going to hurt a lot of people.. You think 3.8% out of a $500K sale is no big deal...

Maybe after a few sellers as you to chip in out of you sales commission to help cover this 3.8% TAX...

So they say its only out of Ivestment properties...L.O.L.  Do the math... What is the percentage of investment properties sold in your office.  20% ?  30%  40%  Now take out 3.8%  how is that going to hit the overall sales number in your office ?  $ 100K $ 200K $ 300K A year thats a big drop in the numbers.  how is your broker going to make up that amount of loss...

TIME TO WAKE UP FROM la.la.land...

Sep 16, 2012 10:05 PM #19
Rainer
55,481
Diane Lombardino
Keller Williams Realty of Jupiter - Palm Beach Gardens, FL

Thanks for the post!  I also had to get clarification on that new tax.  People were reading that misguided document that was going around.  It's really quite simple once it's explained.  You did a fine job of notifying everyone!

Sep 17, 2012 01:34 AM #20
Anonymous
Anonymous
Philip Wade

Hi there

 

Your blog is really excellent. It inspires the readers, I think a big part of that is not understanding. Thanks for sharing this information and hope to read more from great blog.

-----------------------------------------------------------------------------------------

Sell Real Estate: http://toptipsforsellingrealestate.com

 

Thanks

Philip Wade

Sep 17, 2012 04:25 AM #21
Rainmaker
893,629
Michael Setunsky
Michael's Commercial LLC - Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Joy, this proves you can't believe everything you hear or read. Thanks for giving us your accountants view on the tax.

Sep 17, 2012 05:53 AM #22
Rainmaker
392,737
Fred Sed
Orange County Short Sale Foreclosure Realtor - Irvine, CA
Your Orange County Realtor, Why? Because Fred Sed

Thank You for the research and great article!

Sep 17, 2012 06:53 AM #23
Ambassador
1,252,678
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

Excellent idea to ask your accountant. I reblogged it Joy.

Sep 17, 2012 09:18 AM #25
Rainmaker
601,438
Joy Daniels
Joy Daniels Real Estate Group, Ltd. - Harrisburg, PA

I am the broker in our office and we do not work with investment properties so I am guessing this won't affect us as much as it could affect brokers that work more with investments. 

Thanks Erica - I really appreciate the reblog! :)

Thank you Diane and Michael - I am at a loss at understanding all of the ramifications and all we can do is research and check! :)

Sep 17, 2012 09:28 AM #26
Rainmaker
682,187
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

This is more fake than fact.  I have been through several fact-checkers on this and what your accountant said is what I have heard from several quarters.  The one thing your accountant may have omitted was that it applies to the profit OVER the exemption amount  $250k profit for single peopel - $500k for couples)  Given the market, almost no one is making that much of a profit off their home.  Let's say I was lucky enough to be making $250k a year and I had a home that I made a $350,000 profit on. I am single so that means $250,000 of that profit is tax free leaving me with 3.8% tax on $100,000. That's $3800/$350,000 - or $3800 or 1.1%.  

This is hardly an onerous tax burden for those who have done SO WELL over the past few decades.  I happily paid  about $50,000 inheritance tax when my mother died because I was lucky enough to inherit some money.  It was a much larger percentage than what is being described above (roughly 10 fold more proportionately)  and I had no issues with paying it.  It's time for Americans to GROW UP and recognize that if you have gotten much from this country, something is expected BACK.  I'm in a position where I will probably need medicare some day.  Furthermore, bridges, roads and electrical grids, sewer systems and drainage DON'T BUILD THEMSELVES. People who won't pay that tiny amount are simply not patriotic. 

Sep 17, 2012 11:22 AM #27
Ambassador
839,120
Connie Harvey
Pilkerton Realtors - Brentwood, TN
Realtor - Nashville TN Real Estate

Joy, it is a tax and it could eventually be paid by the less fortunate that don't have a gain as great. They seldom remove the tax, just spread it to others.

Sep 17, 2012 12:30 PM #28
Rainer
158,915
Glenn Freezman
Family Abstract, Inc. - Horsham, PA

A tax is a tax is a tax.  It will eventually be used for something.  No good tax bill goes unpunished.

 

Sep 17, 2012 01:15 PM #29
Ambassador
848,103
Suzanne McLaughlin
Sabinske & Associates, Inc. (Albertville, St. Michael) - Saint Michael, MN
Sabinske & Associates, Realtor

Unbelievable the lengths that some people will go to to scare the public.  Thanks for the information, Joy.

Sep 17, 2012 02:20 PM #30
Ambassador
1,182,384
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Joy - Thanks for the clarification. I too have been asked about this a couple of times - well, actually not asked, but told about it, and now I have the answer.

Sep 17, 2012 03:26 PM #31
Rainmaker
601,438
Joy Daniels
Joy Daniels Real Estate Group, Ltd. - Harrisburg, PA
My point was not to make a statement about taxes, politics or anything...I just wanted state that when we get things that need clarification we should professional advice. Thanks Suzanne and Dick...I do hope the explanation helps.
Sep 17, 2012 05:59 PM #32
Rainmaker
1,085,219
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

We have seen this with the lead certification guidelines by the EPA; the 1099 reporting requirement under Obamacare (not the long standing 1099 reporting required by the IRS) and now the 3.8% tax over the capital gains threshold.....more real estate professionals need to learn about capital gains

Sep 18, 2012 03:45 AM #34
Rainer
11,777
Kevin Crawford
Crawford Luxury/KW Luxury International - Boerne, TX

This tax is a disgusting overreach by the government. There are actually a lot of folks that this will affect. Certainly not the majority, but does that make it excusable? Is doing wrong to one person not doing wrong? Even if you're not concerned about those that this will affect, what you need to be concerned about (other than the fact you were lied to when you heard Obamacare wouldn't create one new tax) is that if they can do it to the wealthy, they can do it to you. And they've never given us reason to trust that if given the opportunity to tax more, they won't. 

 

We can give the government 100% of our income. But it won't fix things. Money never HAS fixed things with them. If more money fixed things, the TRILLIONS of dollars poured into social programs every year would have created positive outcome. Instead they say "well, we need more to make it REALLY work". 

 

They've not run anything efficiently, ever. For the public to be OK with them taking more and more money, because it doesn't affect them personally, is ignorant, because it WILL affect them in some fashion. If they do it to one group of people, they'll do it to you too. 

Sep 18, 2012 10:01 AM #35
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