New tax on home sales in 2013

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Now that the presidential election is over, news organizations have more time to fill in their 24-hour news cycle and are in need of new stories. One story that is currently making the rounds is a 3.8% sales tax being implemented in 2013 on home sales. This tax will be charged to the seller at 3.8% on the profit of the home sale, and the proceeds to go help fund “Obamacare.” Is this another blow to the housing market’s recovery?

No, it should not be. Why?

The new home sales tax is true, but it is only applied in specific situations. How do you know if you will be impacted when selling your home?

First, the tax is only implemented to households whose income is $250,000 or more for married filing jointly on their income tax returns ($200,000 if filing single on the returns).

Second, the first $500,000 of profit on the home sale is exempt from this tax.

If the household income exemption doesn’t allow you to avoid this new tax, then the “profit” exemption probably will. Here is an example.

Let’s say that you earn more than $250,000 filing jointly on your tax returns. You bought a home in 2000 for $250,000, and are now selling it for $1,000,000. That is a profit of $750,000. The first $500,000 is exempt from the tax, so only $250,000 will be taxed at 3.8% under the “Obamacare” Act. That means out of the $750,000 of profit on the sale of the home, only $9,500 will be taxed and paid into funding “Obamacare.”

As you can see, this new tax isn’t as impactful as you may be lead to believe by some of the news stories currently being written about it.

In short – don’t worry about losing another 3.8% of profit on the sale of your home in 2013 and beyond. Unless you are making a sizeable profit on the sale of your home (not to mention the yearly earned income), then the new tax will not impact you at all.

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