A Sales Tax When You Sell Your Home?

Following is an email I was forwarded from a reader. It’s from someone who calls himself Joe – maybe you’ve gotten one like it.

DID YOU OR ANYONE KNOW THIS?

REAL ESTATE SALES TAX TO GO INTO EFFECT 2013 (Part of HC Bill)
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 healthcare bill. Just thought you should know. So, this is “change you can believe in?”

As proof, Joe inserted this article from the Spokane Spokesman-Review dated March 28th, 2010, which says in part:

Tax on Home Sales. Imposes a 3.8 percent tax on home sales and other real estate transactions. Middle-income people must pay the full tax even if they are “rich” for only one day – the day they sell their house and buy a new one.

Then Joe goes on to say:

Under the new health care bill – did you know that all real estate transactions will be subject to a 3.8% 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. Is this Hope & Change great or what? Does this stuff makes your November and 2012 votes more important?

Oh, you weren’t aware this was in the obamacare bill? Guess what, you aren’t alone. There are more than a few members of Congress that aren’t aware of it either (result of clandestine midnight voting for huge bills they’ve never read). AND, there are a few other surprises lurking.

Why am I sending you this? The same reason I hope you forward this to every single person in your address book. People have the right to know the truth because an election is coming in November!

You’re right about two things, Joe: People do have the right to know the truth, and there is an election in November. About everything else in your email, however, you’re wrong – and you’re either a jerk for spreading what you know to be false, or you’re a fool for believing it.

Like much propaganda that you’ll see online, on some “news” program, or from people who make their living creating controversy, this one contains a kernel of truth. Rather than explain it, however, I’ll simply show you the clarification that ran in the same newspaper that printed the false information in the first place. Here’s a cut-and-paste from the Spokane Spokesman-Review dated April 3, 2010:

In his recent guest column regarding the impact of the health care bill, Paul Guppy of the Washington Policy Center claimed that a 3.8 percent tax on all home sales was a part of the recently passed legislation. This is inaccurate and needs to be corrected. The truth about the bill is that if you sell your home for a profit above the capital gains threshold of $250,000 per individual or $500,000 per couple then you would be required to pay the additional 3.8 percent tax on any gain realized over this threshold.

Most people who sell their homes will not be impacted by these new regulations. This is not a new tax on every seller, and that correction needs to be made. This tax is aimed at so-called “high earners” – if you do not fall into that category you will not pay any extra taxes upon the sale of your home.

In short, rather than having to a pay a tax of 3.8 percent of the amount you realize on the sale of your primary residence, the truth is something quite different – that if your joint-return adjusted gross income is over $250,000, you might have to pay a tax of 3.8 percent of the amount of gain you realize over $500,000.

Do try this at home

Unlike so many things you see on TV that admonish you “Don’t try this at home!” I’d encourage you to do your own propaganda debunking. Here are the steps I took to lay waste to this particular piece of foolishness:

Step One: If you read something that seems as ridiculous as this does, don’t automatically believe it. (Had Congress passed a bill that was going to cost everyone who sells a home 3.8 percent of the proceeds, don’t you think you’d have heard about it long before now? Trust me – you’d certainly have read about it here!)

Step Two: Put the “facts” into your favorite search engine. In this case, for example, I did a search for “3.8% home sales tax.”

Step Three: Read some of the results. It took my search engine about one-third of a second to point me to several articles by actual journalists written over the last several months about this particular piece of disinformation.

If you see anything from either side that seems too silly to be true, send it along and I’ll share it. When it comes to Washington, it’s hard enough to know what to do when you have the facts. Let’s all pitch in and try not to muddy the water by spreading hysterical idiocy.