3.8% Real Estate Transfer Tax
3.8% Real Estate Transfer Tax
The questions keep pouring in about the new 3.8% real estate tax that takes effect in 2013 and all of the inflammatory and exaggerated statements regarding it. I got a great email from Prudential Fox & Roach’s legal counsel Scott Waldman regarding this very issue and wanted to pass it along.
You may be aware of various statements on the internet asserting that the current administration is going to levy a federal transfer tax on all real estate transactions in order to fund health care reform. It is absolutely correct that a new tax will go into effect in 2013, but it is not as simple as it has sometimes been portrayed. Below is a link to a brochure prepared by the National Association of Realtors® which sheds some light on this issue. Of course, the brochure is no substitute for the advice of a professional tax advisor to whom all consumer inquiries should be directed. Whatever your political persuasion may be, it is a good idea to be familiar with the facts, especially in an election year!
Click here for the brochure Scott is referencing in his email.
Here are some key points to walk away with:
1. At the last minute Democratic lawmakers inserted a new 3.8 percent tax on the net investment income of high-income persons into the Obamacare bill.
2. Only a tiny percentage of home sellers will pay the tax – only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home. (The exclusion doesn’t apply to vacation homes or rental properties.)
3. Some home sales would see a tax increase under this bill 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)
4. 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.
5. 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 2% of families” when it takes effect in 2013.
Here are some examples of people who WOULD pay the tax (from FactCheck.org – a non-partisan research group)
- 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.
Email or call if you have any questions…
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Blog post compliments of CenterCityTeam’s Philadelphia Real Estate Blog
Frank L. DeFazio, Esquire
Prudential Fox & Roach Realtors – Society Hill
530 Walnut Street, Suite 260
Philadelphia, PA 19106
215.521.1623 Direct
610.636.4364 Cellular
888.308.1148 Fax
[email protected]
CenterCityTeam.com: Philadelphia Real Estate
