"Under the new health care law, "all real estate transactions will be subject to a 3.8% Sales Tax" Chain e-mail, Aug. 2
A new chain e-mail wrongly claims that the 2010 health care law will institute a new tax on home sales. Here's the e-mail a reader recently forwarded to us:
"Under the new health care bill — did you know that all real estate transactions will be subject to a 3.8 percent Sales Tax? The bulk of these new taxes don't kick in until 2013 (presumably after Obama's re-election). You can thank Nancy, Harry and Barack and your local Democrat Congressman for this one. 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. … Does this stuff makes (sic) your November and 2012 votes more important?''
The root of this claim appears to be Section 1402 of the Health Care and Education Reconciliation Act of 2010, titled "Unearned income Medicare contribution." It imposes a 3.8 percent tax on the investment income of couples who make more than $250,000 or individuals who make more than $200,000. That could include income from real estate sales, but only applies to high earners, who make up less than 5 percent of all taxpayers.
Currently, workers pay Medicare hospital taxes on wages, up to $106,800. Workers and employers split a 2.9 percent tax; the self-employed pay all of it.
The new tax marks the first time investment income will be subject to Medicare taxes, said Clint Stretch at Deloitte Tax LLP.
The government already taxes investment income in various ways. But lawmakers wanted to link the new revenues to health care, Stretch said.
There are long-standing tax exemptions on the profits from home sales. In general, if you sell your own home, you are not taxed on the first $250,000 of profit and married couples are not taxed on the first $500,000 of profit. That's profit, not the sales price. If you sell your home at a substantial profit, you might get hit with the new 3.8 percent tax on investment income.
Our chain e-mail says a 3.8 percent tax applies to all real estate transactions as a sales tax. That is false. It seems intended to scare people and it urges them to vote based on false information. For that, we award this e-mail a Pants on Fire!
Edited for print. For more, go to PolitiFact.com.