Rumors of home sales tax persist
"Did you know that if you sell your house after 2012 you will pay a 3.8 percent 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 goes into effect in 2013," says the alarming email.
We first wrote about this in November of 2010 after the healthcare bill was signed into law. No one can argue, the Internet is a wonderful tool and full of valuable information. Unfortunately though, it is also full of misinformation, especially when that information comes from an erroneous email, circulated for years as if it were some new and shocking conspiracy.
This particular email goes on to say, "Why 2013? Could it be to come to light AFTER (sic) the 2012 elections? So, this is "change" you can believe in?" "This bill will have a devastating effect on the retiring generation who often downsize their homes."
Certainly, those folks receiving this email may be alarmed that their hard earned equity may be taxed, costing them several thousand dollars more after seeing their home's value decline in recent years. Not to worry. As we reported in 2010, most Americans will not notice the tax. Yes, it does exist. Yes, it is in the health care bill, but it doesn't exactly work as quoted in this alarmist's email.
The first $250,000 of profit from the sale of your home remains tax free, or twice that amount if a married couple ($500,000). The tax does affect those in higher income brackets though, when their income comes from other sources.
If your income is in excess of $200,000 per year or $250,000 for married couples filing jointly, you may be subject to this tax.
Even so, the tax will not apply to the first $250,000 or $500,000 of profit - the difference in the purchase price versus the selling price.
"Some home sales would see a tax increase under this bill," says William Ahern of the non-profit Tax Foundation "but it would have to be a second home or a principal residence generating (a gain of) more than $250,000 ($500,000 for a couple).
Some who are likely to pay the tax:
• A single person earning $220,000 per year who sells their vacation home for a $50,000 profit. The tax on that home would amount to about $1,900 in addition to the capital gains tax they would be required to pay even before this law was enacted.
• A mature couple with income of over $250,000 per year who sell their million dollar home (primary residence). If, because they have owned the home for quite some time, their profit on the sale is $600,000, they would be taxed on $100,000 of the profit ($600,000 less the $500,000 exempt) for a tax of $3,800, or the amount stated in this erroneous email.
The average price of a single family home in the Coeur d'Alene Multiple Listing Service last year was $166,989 so it's not likely that most people here will be adversely affected by this new tax. Any tax is hard to swallow though, so it is easy to be sucked in when someone screams, "The sky is falling!" through an email campaign designed to rile up the masses.
There are a number of Internet fact checking sources you would be well served to verify any suspicious emails with. Two of them are; www.Snopes.com and www.FactCheck.org. Both have proven reliable in our experience. If you want to know what is going on with real estate and taxes....
Trust an expert...call a Realtor. Call your REALTOR or visit www.cdarealtors.com to search properties on the Multiple Listing Service, or to find a REALTOR member who will represent your best interests.
Kim Cooper is a real estate broker and the spokesman for the Coeur d'Alene Association of REALTORS. Kim and the Association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of REALTORS, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling 208-667-0664.