Thursday, February 3, 2011

Sales Tax on your Home~ correct information

Information from Van Eaton & Romero:

A 3.8 Percent “Sales Tax” on Your Home?

Q: Does the new health care law impose a 3.8 percent tax
on profits from selling your home?

A: No, with very few exceptions. The first $250,000 in
profit from the sale of a personal residence won’t be taxed,
or the first $500,000 in the case of a married couple. The
tax falls on relatively few — those with high incomes from
other sources.

The sort of people who would have to
pay the tax might include, for example:
■A single executive making $210,000 a year who sells his
$300,000 ski condo for a $50,000 profit. His tax on the sale
of that vacation home would amount to $1,900, in addition
to the capital gains tax he would have paid anyway.
■An "empty nester" couple with combined income of over
$250,000 a year who sell their $1 million primary residence
to move to smaller quarters. If they cleared $600,000 on the
sale, they would be taxed on $100,000 of the profit (the
amount over the half-million-dollar exclusion). Their health
care tax on the sale would amount to $3,800 over and
above the usual capital gains levy.

However, a typical home sale would not incur any tax. In
March, for example, half of all existing homes sold for
$170,700 or less, according to the National Association of
Realtors. Obviously, none of those sales could possibly
generate a $250,000 profit, and so none would be subject to
the tax.

Thus, for the vast majority, the 3.8 percent tax won’t apply.
The Tax Foundation, in a report released April 15, said the
new tax on investment income (including real estate) "will
hit approximately the top-earning two percent of families"
when it takes effect in 2013.

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