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Real Estate Sales Tax

Soapweed

Well-known member
Intend to sell your home? If you do, you may pay more in taxes than expected! How is that hope and change working out?

Real Estate Sales Tax


Under the new health care bill - did you know that all real estate transactions are subject to a 3.8% “Sales Tax”? See article below from the Spokane newspaper.

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.


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From The Spokesman-Review, by Paul Guppy, March 28, 2010

In the days leading up to the dramatic late-night vote on President Barack Obama’s health plan, Speaker Nancy Pelosi said, “We have to pass the bill so that you can find out what is in it …” Now that ObamaCare has passed, it is slowly dawning on people what the new law means for the country and for Washington state.

ObamaCare sweeps away a host of state regulations and permanently alters our state’s insurance market. From now on, the federal government will manage the health care of all Washingtonians. The 2,700-page law contains a complex web of mandates, directives, price controls, tax increases and subsidies.

Federal officials will now decide what kind of insurance people in Washington must have, what medicines will be covered, what treatments are allowed and which are not. Early reports indicate, however, that President Obama, Vice President Biden, the Cabinet, senior members of Congress and leadership staff are exempt.

The new law falls well short of universal coverage. ObamaCare will leave about 6 percent of Washington residents without coverage. The measure is conservatively expected to cost $2.4 trillion in its first full decade. Thousands of older Washingtonians will lose their Medicare Advantage coverage, and the state’s 120,000 Health Savings Account holders may need to buy new policies or face stiff penalties.

Washington residents will begin paying ObamaCare taxes this year, while most benefits don’t start until 2014. The law includes some 19 new taxes. Here’s a rundown of what Washingtonians can expect in the coming years.

Penalties on individuals. Individuals will pay a yearly penalty of $695, or up to 2.5 percent of their annual income, if they cannot show they have purchased a government-approved health policy.

Penalties on families. Families will pay a yearly penalty of $347 per child, up to $2,250 per family, if parents cannot show they have purchased a government- approved policy.

Penalties on employers. Business owners with more than 50 employees must buy government- acceptable health coverage or pay a yearly penalty of $2,000 per employee if at least one employee receives a tax credit.

Tax on investment income. ObamaCare imposes a 3.8 percent annual tax on investment income of individuals making $200,000 or more and on families making $250,000 or more. The new tax is not indexed to inflation, so more people will fall under it each year. Seniors on fixed incomes and people with IRAs and 401(k) plans will be hit particularly hard.

Tax on “Cadillac” health plans. Starting in 2018, imposes a 40 percent annual tax on health care plans valued at $10,200 for individuals and $27,500 for families.

Medicare tax increase. Requires single people earning $200,000 or more and couples earning $250,000 or more to pay an additional 0.9 percent in Medicare taxes.

Tax on Home Sales. Imposes a 3.8 percent tax on home sales and other real estate transactions. Middle-income people must pay the full tax even if they are “rich” for only one day – the day they sell their house and buy a new one.

Tax on medical aid devices. Creates a new 2.9 percent tax on medical aid devices. Certain items intended for personal use are exempt.

Tax on tanning. Imposes a 10 percent tax on services at tanning salons. Business owners will collect the tax from customers and send it to the federal government. This appears to be the first federal sales tax in the United States.

ObamaCare will be enforced by the Internal Revenue Service. The tax agency plans to hire 16,500 new auditors, agents and investigators, and to increase enforcement audits. The IRS can confiscate tax refunds, place liens on property and seek jail time if health-related penalties and taxes are not paid.

President Obama had said people could keep their coverage if they want, yet the Congressional Budget Office estimates that under ObamaCare 8 million to 9 million people will lose their employer-provided coverage.

The ObamaCare law passed over bipartisan opposition in Congress. Republicans say they will run on a “repeal and replace” platform this fall, and Washington has joined 12 other states in a lawsuit challenging the federal government’s power to force state residents to buy a product – insurance – from private companies. The long-term prospects of ObamaCare are unclear. In the meantime, Washingtonians should prepare for major changes in their tax burden.

Paul Guppy is vice president for research at the Washington Policy Center, a research organization with offices in Spokane, Seattle, Olympia and the Tri-Cities



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Triangle Bar

Well-known member
I've read this before and I think from what I've read this 3.8% is the increase in the capital gains rate... and it would only apply to those above the exemptions of $250,000/individual or $500,000/couple. Having said that it doesn't make it right or realistic to whom it would apply. The simple increase in property value could make this apply to most any one, especially us land barons:wink:. You know the saying, 'live poor & die rich".
 

Steve

Well-known member
fact checks says it is false... but then goes on to say..

At the last minute, Democratic lawmakers decided on a new 3.8 percent tax on the net investment income of high-income persons.

And it does say the tax falls on "net gain … attributable to the disposition of property." That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is "taken into account in computing taxable income" under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already. (That exclusion doesn’t apply to vacation homes or rental properties.)

The Internal Revenue Service says that to qualify for the $250,000/$500,000 exclusion, a seller must have owned the home and lived there as the seller’s "main home" for at least two years out of the five years prior to the sale.

so yes.. it is true.. but like other home sale transactions there is exemptions and it will only tax the rich, and those with rental properties and those selling a home left to them, and vacation homes and income property... and... well it is a tax so expect to some day be a bit upset when it hits you right smack in the savings account...
 

Faster horses

Well-known member
Here is some information I got on this subject from a realtor:

OPERATION TIP-OFF

E-MAIL CHAINS DISTORTING THE TRUTH ON TWO KEY ISSUES
Energy license/retrofits and health care ‘transfer tax’ claims are false! false! false!




Washington, D.C. (April 29, 2010) – Two e-mail chains have circulated among members and are generating a lot of confusion in the Realtor® ranks. One claims that pending legislation in the Senate would require an energy license or retrofit for home sales, the other that the recently passed health care bill contains a 4.0 percent “transfer tax” on homes sales. Both are wrong.
Here’s the real skinny on both. And PLEASE pass on to your members as quickly as possible:
“Homeowners—Listen Up” e-mail:
This e-mail is inaccurate. There is no requirement in H.R. 2454, The American Clean Energy & Security Act, that home sellers obtain either a license or energy audit or make energy retrofits before they can sell their home. The legislation, earlier passed by the House, is pending in the Senate.
Here are the two REAL provisions in the bill:

Section 202 (Building Retrofit Program) would offer matching grants for home improvements. State government would administer the program, which is voluntary and available to all property owners.
Section 204 (Building Energy Performance Labeling Program) would apply to new construction only and prohibit time-of-sale labeling. The original energy audit and MLS listing provisions were deleted as the result of NAR insistence; existing real estate was excluded from the bill’s requirements.

NAR will work to ensure that these provisions are retained in the Senate version. We were also instrumental in eliminating time-of-sale energy efficiency requirements from the bill. Senators John Kerry (D-Mass.), Lindsay Graham (R-S.C.), and Joe Lieberman (I-Conn.) are pursuing bipartisan support for an alternative to the House bill, and NAR will monitor that progress to ensure residential and commercial real estate are not adversely impacted.

“National Real Estate Transfer Tax” e-mail:
An opinion piece in the Spokane, Wash., Spokesman-Review last month reported inaccurately that the health care bill contained a provision for a 4.0 percent “sales tax” or “transfer tax” on the sale of a home. This e-mail, too, was circulated far and wide, and is inaccurate. We responded to questions from the media and members and continue to do so. This week we got a boost from an unexpected third-party, the Portland (Ore.) Oregonian. The Oregonian did some old-fashioned fact-checking, and reached correct conclusions published Tuesday, April 27.
Read the analysis by FACTCHECK.ORG, SUMMARY: THE CLAIM IS FALSE
Let us sum up: The health bill included a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have “net investment income.” Any revenue collected by the tax is dedicated to the Medicare hospital insurance program.
This new tax applies only to households with Adjusted Gross Income of more than $200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property.
But there are two major factors in figuring out the tax, which is complex. Keeping in mind that the new 3.8 percent Medicare tax is assessed only when the $200K/$250K AGI limits are exceeded, the amount of net investment income subject to tax is the LESSER of 1) total net investment income OR 2) the excess of AGI over the $200K/$250K AGI limits.
However, even when the AGI limits are met, the new tax would not be applied to capital gains that result from the sale of a home, since the existing home sale capital gains exclusion rule still applies – $250,000 (individual)/$500,000 (couple). So if the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid on the gain. The new Medicare tax would apply only to a home sale gain realized in excess of the $250K/$500K that pushes the filer’s AGI over the $200K/$250K income limits.
Some other quick points:
There is no such exclusion for the sale of a second home.
The new Medicare tax will take effect January 1, 2013.
The legislation makes no changes to the mortgage interest deduction.
NAR has posted a detailed Q&A on this issue and on the new health care bill. The Q&A will be updated as other provisions are developed.
For more information on the tax provisions in the health care legislation, contact: Linda Goold, 202-383-1083, [email protected] .
 
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