Taxing the Rich

The Truth About the 3.8% Tax on All Home Sales
by Christopher Galler
Chief Operating Officer
We're being flooded by calls and emails about whether the new Health Care Bill has a federal tax on the proceeds from the sale of your home. The statement goes something like this:

UNDER THE NEW HEALTH CARE BILL - DID YOU KNOW THAT ALL REAL ESTATE TRANSACTIONS ARE SUBJECT TO A 3.8% "SALES TAX"?
YOU CAN THANK NANCY, HARRY & BARACK (AND YOUR LOCAL CONGRESSMAN) FOR THIS ONE.
IF YOU SELL YOUR $400,000 HOME, THIS WILL BE A $15,200 TAX.
As with most things found circulating through the "blog-o-sphere" of our partisan world, this is not entirely true. It is also not entirely false. The new Health Care Bill does include a new 3.8% tax on SOME high income earners ($200,000 single/$250,000 married) after the current capital gains exclusion of $250,000 for singles/$500,000 for married. You can review an accurate portrayl of the new tax at: http://www.factcheck.org/2010/04/a-38-percent-sales-tax-on-your-home/
Of real interest to REALTORS® is the willingness of government to look at housing benefits for tax revenue. In 2009, the Minnesota House of Representatives passed a bill calling for a significant reduction and redistribution of the Mortgage Interest Deduction and elminition of the property tax deduction in Minnesota. This bill was not accepted by the Senate, but it did pass the MN House of Representatives. President Obama's Budget (not yet passed into law) includes a 5-year reduction in the Mortgage Interest Deduction at the federal level. And, as we noted above, there is an increase in the taxes paid for some homeowners in order to help fund the Health Care Bill.
As demographics change and government looks for items to tax, real estate is no longer viewed as an untouchable cornerstone of the American Dream. Instead, government at the state and federal level are increasingly willing to chip away at real estate tax benefits. This strategy slowly erodes the benefits in a way that many don't realize until it is too late to stop.