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PolitiFact: A 3.8 percent 'sales tax' on real estate transactions for health care?

It's a chain e-mail that has been popping up in the PolitiFact inbox again and again lately, with readers asking the same question: "Can this possibly be true?"

The e-mail claims real estate transactions will be taxed to pay for the new health care law supported by President Barack Obama and other Democrats.

"Did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That's $3,800 on a $100,000 home etc. When did this happen? It's in the health care bill. Just thought you should know. …

"The bulk of these new taxes don't kick in until 2013. If you sell your $400,000 home, there will be a $15,200 tax. This bill is set to screw the retiring generation who often downsize their homes."

The e-mail urges you to click to an April 2010 blog entry from the Republicans in Congress that makes a similar argument.

We've seen and ruled on this e-mail before, but because it continues to bubble up, we thought it would be useful to reiterate our earlier ruling: The chain e-mail and the blog post are deceptive.

Here's why:

Instead of being a sales tax on all real estate transactions, the 3.8 percent tax is actually a tax on investment income for the wealthy. It applies only to the investment income of single taxpayers who make more than $200,000 or couples who make more than $250,000. (We looked it up in Section 1402 of the Health Care and Education Reconciliation Act of 2010, titled "Unearned income Medicare contribution.")

Still, maybe empty-nesters are scared they will be hit with this tax if they sell their homes for more than $250,000. But that's not a likely scenario for most taxpayers, because there's a long-standing tax exemption on the profits from home sales.

To be hit with the new tax, you would have to clear more than $250,000 in profit off your home, which means at least $250,000 more than you paid for it. And the ceiling is even higher for a married couple. Married couples are not taxed on the first $500,000 of profit from home sales. Again, that's profit, not the sales price.

When we first reported on this e-mail last year, we rated it Pants on Fire, because it was written to deceive people into thinking that all home sales would be taxed. That wasn't the case then, and it's still not the case. Only high-earners will have to pay the tax, and then only if profits from the housing sale exceed the legal exemptions from taxes.

Yes, the health care law includes new taxes. But the taxes won't hit most retirees looking to downsize their homes, only those who are also among the nation's highest earners. Because it seems aimed at scaring older Americans, we rated the e-mail's claim Pants on Fire. Our rating stands.

For more rulings, go to PolitiFact.com.

PolitiFact: A 3.8 percent 'sales tax' on real estate transactions for health care? 02/02/11 [Last modified: Wednesday, February 2, 2011 9:22pm]
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