Real Estate Sales Tax as Part of the Patient Protection and Affordable Care Act?

Real Estate and Sales TaxI met with a very nice couple today who asked me if it was true that “Obamacare” legislation included a 3.8% “real estate sales tax” on all transactions. Apparently, this statement has been making the rounds as a “fact” since the legislation was passed.

I was able to tell them that this is not quite (or not even close) to true. It is correct that the Patient Protection and Affordable Care Act (or “Obamacare”, if you insist) includes a 3.8% Medicare tax on investment income of higher-income households. In 2013, the tax will be assessed on income received as a profit on the sale of investment property, including real property. This could include, among other things, capital gains, dividends, interest payments and net rental income on rental property.

It will only apply to individuals with gross income of $200,000 or more, or married joint filers with combined gross income of $250,000 or more.It will apply, in some cases, to the sale of principal residences for those homeowners who net more than the home-sale capital gains profit threshold. That’s $250,000 for a single seller or $500,000 for married joint filers. At that, it will only apply to the profit amount in excess of the filing status applicable threshold.While this post is not intended as legal advice, and you should check with your own tax or legal professional regarding this or other real estate, tax, and legal questions, this “real estate sales tax” question was of interest to me, since it shows how a “rumor” can take on a life of its own.