HEALTHCARE BILL CONTAINS REAL ESTATE TRANSFER TAX

There is a very popular email circulating that states the newly passed healthcare bill contains a 4.0% tax on the sale of real estate. This claim is false. There is a capital gains tax included in the bill, but when applied to real estate there are several exclusions. Foremost of which is a $250K (individual) $500k (joint) exemption on any gaines. So a sale of a $350k home with a gain of $125k would be exempt was would the majority of real estate sales in the U.S. A $2.5M home with a gain of $625k would pay additional tax on $125k.

I would like to share with you article in the May issue of the JOHN HALL & ASSOCIATES Broker Update regarding the "National Real Estate Transfer Tax" email:

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An opinion piece in the Spokan, Washington Spokesman-Review last month reported inaccurately that the health care bill ocntained a provision for a 4.0 percent "sales  tax" or "transfer Tax" on the sale of a home. This email, too, was circulated far and wide, and is inacurate. We responded to questions from the media and members and continue to do so. This week we got a boost from an unexpected third-party, the Portland (ore.) Oregonian. The Oregonian did some old-fashion fact-checking, and reached correct conclusions published Tuesday, April 27.

Read this analysis by FACTCHECK.org, SUMMARY: THE CLAIM IS FALSE

Let us sum up: the health bill included a provision that imposes a 3.8 percent Medicare tax for some high-income  households that have "net investment income." Any revenue collected by the tax is dedicated to the Medicare hospital insurance program.

This new tax applies only to households with Adjusted Gross Income of more than $200,000 for individuals or more than $250,000 for married couples. Since captial gains are included in the definition of net investment income, an additinoal tax obligation might result from the sale of real property.

But there are two major factors in figuring  out the tax, which is complex. Keeping in mind that the new 3.8 percent Medicare tax is assessed only when the $200k/$250k AGI limits are exceeded, the amount of net investment income subject to tax is the LESSER of 1) total net investment income OR 2) the exces of AGI over teh $200k/$250k AGI limits.

However, even when the AGI limits are met, the new tax would not be applied to capital gaines that result from the sale of a home, since the existing home sale capital gains exclusion rule still applies - $250,000 (individual)/$500,000 (couple). So if the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid on the gain. The new Mediare tax would apply only to a home sale gain realized in excess of the $250k?$500k that pushes the filer's AGI over teh $200k/$250k income limits.

Some other quick points:

• There is  no such exclusion for the sale of a second home.

• The new Medicare tax will take effect January 1, 2013

• The legistlation makes no changes to the mortgage interest deduction

NAR has posted  detailed Q&A on this issue on the new health care bill. The Q & A will be updated as other provisions are developed.

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I hope this gives you a better understanding of what is occuring with additional links to get an even greater understanding of this topic.

Scottsdale, AZ (and surrounding area) home sales - Please call us: 480-948-0550,
Ask for the Farmer Group - "It's A Farmer's Market." John Hall & Associates.

REAL ESTATE: "HOW"S THE MARKET"  I'm often asked at local gatherings. "Good and getting better" I say. Why do I say this when much or most of the news articles spout negative news? Because I follow the numbers. Real estate runs in cycles, most people understand this. Where are we in our current cycle? Most people believe we are down and/or heading down. In fact, we are headed back to balance. This move began in April of 2009. Home prices rise and fall, but they will always return to a balance.

The valley experienced high highs and then low lows, but prices are steadily climbing according to numbers from our local Multiple Listing Service (MLS). They may not be climbing as fast as some would hope or want, but climbing they are. If you look at a graph of prices you would see a drastic "V" shape up-turn last April. clearly an indication of bottom. From a  personal note, we've seen out-of-town lookers become out-of-town buyers once again. This includes both housing and land prices.

Scottsdale, AZ residential home sales | Call Us: 480-948-0550, Ask for The Farmer Group - "It's A Farmer's Market"