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3.8% Real Estate Tax in Obamacare?

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Obamacare

Viral rumor claims the Obamacare legislation imposes a 3.8% home sales tax on every U.S. real estate transaction beginning in 2013.

Description: Rumor
Circulating since: April 2010
Status: Mixed / Misleading (see details below)


Example #1:
Email contributed by Kathryn C., April 15, 2010:

Fwd: Health Care Real Estate Tax

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.

Remember Obama's battle cry - take from the workers and give to the drones.

------------------------------


Example #2:
Email contributed by Barbara M., July 8, 2010:

FW: New Real Estate Sales Tax

Under the new health care bill all real estate transactions will be subject to a 3.8% Sales Tax. The bulk of these new taxes don’t kick in until 2013 (presumably after Obama’s re-election). You can thank Nancy, Harry and Barack and your local Democrat Congressman for this one. If you sell your $400,000 home, there will be a $15,200 tax. This bill is set to screw the retiring generation who often downsize their homes. Is this "Hope & Change" great or what? We can vote the bums out in November and demand that they eliminate the bill or at the very least defund it. Then in 2012 repeal it.



Analysis: While not completely false, the above messages do convey the erroneous impression that the health care reform act passed by Congress in 2010 imposes a 3.8% sales tax on all real estate transactions beginning in 2013.

It doesn't. Here's the real scoop, based on the best analyses I can find:

Among the several new taxes and tax increases provided for in the final legislation (see Kiplinger for more on new Obamacare taxes) is a 3.8% tax on investment income for "high earners." Revenues from the tax, which goes into effect in 2013, will be dedicated to the Medicare Trust Fund.

"High earners" are defined as individuals whose gross income is $200,000 or more, or married couples filing jointly with a combined gross income of $250,000 or more. The tax doesn't apply to the first $250,000 of unearned income for individual taxpayers (or $500,000 for married couples filing jointly).

Given that most taxpayers make less than $200,000 per year and most home sales don't clear profits exceeding $200,000, the vast majority of Americans won't be subject to this tax.


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Sources and further reading:

Health Care Reform: 13 Tax Changes on the Way
Kiplinger, 6 April 2010

Fact or Fiction? The Health Care Law and Real Estate Tax
Washington Post, 17 July 2010

Health Care Reform: How Much Does It Redistribute Income?
The Tax Foundation, 15 April 2010

A 3.8 Percent 'Sales Tax' on Your Home?
FactCheck.org, 22 April 2010


Last updated 08/26/13

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