“ARE YOU SELLING YOUR HOUSE IN OR AFTER 2012” is the headline of an error-filled, deceptive, fraudulent, propagandist e-mail that is being circulated to instill fear in those who may sell their homes next year. It suggests there is a transfer tax on all homes sold in 2012.
There is a section in the health care bill that was voted into law last year that stipulates that certain real estate transactions are subject to taxation in order to fund Medicare. The erroneous e-mail went viral last year and, as a result of its proliferation, the National Association of Realtors began a campaign to educate its membership.
There is a tax, an here’s how it works according to Robert Freedman, a senior editor at REALTOR magazine:
“For individuals earning $200,000 a year or more or married couples earning $250,000 a year or more, certain income above these levels might be taxed.” However, single people making less that $200,000 or married couples making less than $250,000 will not be taxed. To repeat, there is no new real estate tax for those earning less than those numbers, period.”
Most important is that the $250,000 capital gain exclusion for individuals and the $500,000 capital gain exclusion for married couples remain in place, Freedman says. So a married household can sell a house and make $500,000 and not be taxed on that gain.
To continue to recap as we go, so far we have this: A married couple can sell their home and have a profit – not sales price – a profit of $500,000 and pay no tax.
The following is an example sent to Realtors to help them defend themselves and their clients form this attack:
“Let’s take a look at a married couple that has $325,000 in adjusted income (AGI) plus $525,000 in capital gains form the sale of their house. For this household, only $25,000 of the gain is taxable, so the e tax would be $950.00. They would make $850,000 that year and be subject to a tax of $950.00. This is in 2013, the year the e-mails warn you.
“Other tax issues could come into play, but this is a basic example. This revenue generator is expected to earn $325 billion over eight years.”
All of these e-mails have their purpose. Use diligence. Seek advice. I wouldn’t make any real estate buying or selling decisions without consulting someone with knowledge of the tax code. And, if you get the e-mail, inform the recipients that it is inaccurate, please.
We have enough real problems. No need to create problems where there are none.
Richard Courtney is a broker with Pilkerton Realtors and author of Come Together: The Business Wisdom of the Beatles. He can be reached at [email protected].