Questions have arisen concerning whether the recently enacted health care bill imposes a new 3.8 percent Medicare tax on the net gain realized from the sale of personal residences.
The National Association of REALTORS® has described the reports as false and published an “NAR Myth Busters” circular to present its point of view. Here’s what it had to say:
“The health care bill included a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have “net investment income.”
“This new tax applies only to households with an 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.
“Even if 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 appliese—$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 $200,000/$250,000 income limits.”
How many properties in high-priced San Francisco will be affected by the new tax remains to be seen. The good news is, the tax will not go into effect until January 1, 2013.