Have you heard grumbling in the real estate community about the alleged affect the healthcare law will have on real estate taxes?
- Yes. (70%, 217 Votes)
- No. (30%, 93 Votes)
Total Voters: 310
Rumor has it the healthcare law recently upheld by the U.S. Supreme Court will adversely affect sellers of real estate, causing them to pay a 3.8% surtax on their home sale.
There is a grain of truth to this gossip, though it will affect very few homeowners.
Effective January 1, 2013, single-filing taxpayers with an adjusted gross income (AGI) greater than $200,000 and couples filing jointly with an AGI more than $250,000 will be subject to the new 3.8% surtax on any capital gains on investment income exceeding a prescribed threshold.
If the capital gain realized on the sale exceeds the principal residence profit exclusion limit of $250,000 for single-filers and $500,000 for joint-filers, the amount exceeding the threshold will be taxed at 3.8%.[Internal Revenue Code §121]
Verdict: this surtax will affect only high-income taxpayers, and even then, only those rare few who will net a profit on the sale greater than $250,000.
first tuesday take
So who is worried, exactly? Sellers won’t be making capital gains large enough to qualify for the surtax for many, many years. Aside from the aberrant real estate Millennium Boom from the early 2000’s, home prices historically increase at the rate of inflation (about 2% per year).
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Thus, a mid-tier home purchased by a single-filing taxpayer (with an AGI greater than $200,000) for $300,000 today will be exempt from this rule until he is able to sell the property for at least $550,000. At an average appreciation rate of 2% per year, this will not occur until the 2040s.
This surtax misunderstanding is the result of mean-spirited political gossip; mostly in the form of mass e-mails (perhaps you or your clients received one?). The idea is to tell only a fraction of the story — a piece designed to instill ire — then let the speculation run rampant. Intentionally misleading information promotes paranoia and misinforms the public (particularly sellers), yet proves fruitful for those with political agendas. Agents must know the facts — all of them, not a sound-bite fraction—in order to combat deceit and keep their anxious sellers informed.
Let’s set the propaganda straight: this new surtax will affect very few homeowners. However, it does not mean that none will be affected. High-income sellers may wish to seek professional tax advice beyond the casually forwarded e-mail, especially if they own multiple investment properties or vacation homes.
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Re: Health-care law’s 3.8 percent surtax will not affect many home sellers from the Washington Post
This health care tax affects not just home sale but all types real estate including sale of large income producing properties. It is problematic some sellers will want to reduce the Broker’s commission to offset their costs of the heath care tax.
This article appears only to have addressed the effect of the 3.8% Health Care Bill Tax on home sales, not the sale of other kinds of real estate, e.g. apartment buildings, mobile home parks that have held their value. No doubt seller’s of commercial/income producing property will want to cut the broker’s earned commission to offset the 3.8% tax.
It is apparent that the author of this opinion piece did not do her homework. Aside from the fact that she neglected to view historic appreciation values in areas with well above national averages she has not accounted for the fact that this 3.8% surtax is in addition to all of the other taxes that must be paid in association with the sale of a property. What about ordinary capital gains, city, county, and state taxes. Additionally, why does it seem to be such an affront to her that people above a certain income bracket or with gains above an arbitrary figure should have to pay a disproportionate share? I do not even come close to having to pay this surtax but ultimately it is the principle of the matter and in my opinion just plain wrong.
We should be concerned not with “does it affect me” but also the precedent and if it is right or wrong. As self employeds, we have paid our own health insurance for years, which can be a strugge to do, but “free” health care will probably be the most expensive health care we ever have.
I don’t so much mind income tax, at least it means there was income. But the estate tax on our ranch if it goes back to $1 million would probably mean the end of it. Sheep do not make that much, even less now that the HSUS has manage to outlaw poisoning coyotes and they sometimes kill a third of the lamb crop, usually for sport. And why is the estate tax percentage so HIGH?
To presume that the new tax will not adversly effect real estate markets in California is illusionary,short sighted and frankly just plain stupid!! First the market acts by people coming into ownership at the lower end and moving up as the older generation moves out at the higher end. Each of these moves is accompanied by increasing income that adds to the adjusted gross income moving to higher brackets BUT restrained by this added burden.
Secondly the amount of spending by the government beyond all tax revenues coupled with the excessive monitization of the government borrowings means uncontrollable inflation is looming in the future and that will further push up home prices into the health tax area.
ALL THIS TO PAY PEOPLE NOT TO WORK.
Tell me, if you will, how many POOR people don’t have a flat screen TV, don’t have a cell phone, don’t ready have free health care, don’t have a car, don’t have a refergerator, etc., etc.
It appears that the author of,this article presented a very one sided point of view, and also the opinion presented is not based on historic fact of California real estate appreciation, but on a faulty opinion and bias.
California has many high end communities where about 50% of the residents ( literally thousands and thousands) purchased their home 30, or so, years ago for the then market price of around $300,000 and hit $3,000,000 at the 2006 market peak and dropped 33% to around $2,000,000 today. Many of these folks are now reaching retirement age and desire to sell and have a whopping $1,700,000 capital gain. Why is it fair that they should have to pay an ADDITIONAL 3.8% tax to help Obama health carter and the 47 5 who pay no taxes at all?
Also, the author is wrong wrong wrong regarding the appreciation rate of homes. It is a fact here in California that homes doubled in value each decade (each 10 years) between 1970 and 2000 even before the wild appreciation after the year 2000. Based on the “rule of 72” ( where one diced the length of time it takes to double by the number of years one gets the rate of appreciation) such doubling each 10 years is a 7.2% rate of appreciation which is far far greater then the rate of inflation. Based on the historical rate of appreciation between 1970 and 2000 it is far more likely that once the Banks get rid of all the backlog of foreclosures, which Banks sell below market rates thus driving down home prices, that real estate will, return to the historic rate of appreciation of around 7%.
In the more desirable communities of California there generally is little land available to build on and slow growth policies prevent the supply of new houses to keep up with the demand for housing and State population growth. This imbalance in supply and demand in desirable communities is a powerful force to drive up the home prices in these communities. So buyers of the $1,000,000 starter homes in these communities can expect an appreciation rate of doubling every 10 years which after 10 short years can result in a $1,000,000 capital gain–subject to this ADDITIONAL 3.8% tax built into Obama health care act.
This real estate tax, which has no possible relation to health care, will affect everyone down the road.
Add to that the rise of capital gains tax to 20% from 15%.
As a company supposedly helping real estate issues, how is it that you constantly write propaganda for the current administration, who is an enemy of business?
If you are going to use your home as an investment there is nothing wrong with paying a little tax on it. Some of you people sound like spoiled little brats who don’t want to pay tax on investment (or anything for that matter) and who just plain sound greedy to me…
Ms. Reyes, I do not understand why Liberals, such as yourself, think it is okay to add taxes onto people for either being successful or benefiting from success ( inheritance, etc ) this tax along with the whole ACA bill is nothing more than a power and money grab. just more of Obama’s class warfare garbage. for the most part, the difference between successful and non-successful people is the willingness to take a risk. I am not a rich man by any stretch, but, would never feel that I have been cheated because of someone else’s success. I have a question? why are a great number of famous Liberals who espouse wealth redistribution Multi-Millionaires, such as our president. you would think that anyone who advocates these ideas would be willing to give the majority of their wealth to the Government and live without the niceties we enjoy today. sorry for the diatribe, but, most of your respondents already have made some good points.
Who writes these reviews to support the Obama Tax increases??? This will affect most of us – DOWN THE ROAD – TODAY it is affecting a lot of people, Contrary to what you seem to think. Get your facts more in line with reality and quit trying to slant things to make Obama Care sound good. You are a reporter and are supposed to be objective – if you had all the facts BEFORE you wrote the article it MIGHT have been more balanced – I repeat – MIGHT have been.
Did I miss something in the story? What the hell is a REAL ESTATE surtax doing in a healthcare bill anyway.