Ah, election season — when the myths fly fast and furious. An old classic is popping up again. So let’s be clear:
THERE IS NO 3.8% REAL ESTATE TAX NOW OR IN 2013. It’s a myth. It’s a lie. It’s not true.
Ah, but rumors have basis in fact, no? There must be some kind of tax or something, right? Sure is… sort of.
In 2013, a handful of high-income earners will pay an additional Medicare tax on capital gains — that’s profits — above a quarter million dollars. Does it apply to you or your clients? I’m betting no.
- Do you have an income above $200,000?
- Did you sell a property for a profit of more than $250,000 (note: that’s a quarter-million bucks in profit, not sales price).
If you meet both those criteria (rich + large profit on a sale), you’ll pay a whopping 3.8% on the profit above $250,000.
So let’s say your income is $201,000. You bought a house back in 1971 for $200K and sell it for $725K today. That’s $525,000 profit. (Nice!)
Your extra tax? Wait for it — $950. Yes, that’s right. Better call your accountant, huh? Time to hide some money in the Cayman Islands, lest you help a senior pay for medication or something.
Sorry for the snarkiness, but this same thing keeps coming up over and over, and it’s annoying to have to continually debunk it.
Say it with me, folks: There is no 3.8% real estate tax. And if you see someone spreading the rumor, smack them upside the head. Or at least point them to the brochure NAR prepared for this very reason.