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***Sales tax on your house!!!

Discussion in 'Politics, Elections & Legislation' started by Bob Schultz, Jul 31, 2010.

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  1. Bob Schultz

    Bob Schultz Well-Known Member Supporting Vendor

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    My goodness we learn something new our wonderful legislators looking out for our interests have done for us every day.


    Under the new health care bill - did you know that all real estate transactions are now subject to a *3.8% Sales Tax? The bulk of these new taxes don't kick in until 2013 (presumably after Obamas re-election). You can thank Nancy, Harry and Barack and your local Democrat Congressman (Kay Hagan (N.C); Bill Nelson (Fla.); Jim Webb (Va.) 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? Oh, you weren't aware this was in the Obamacare bill? Guess what, you aren't alone. There are more than a few Congressman that aren't aware of it either. AND, there are a few other surprises lurking.
     
  2. recurvyarcher

    recurvyarcher Well-Known Member

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    The first $500K of capital gains on a home sale is sheltered for married couples, so the 3.8% tax would apply to the gain above that amount. This law won't hurt a lot of people who purchased houses and that now have a lower market value. It WILL hurt people who purchased their homes and paid them off a long time ago in places like California, where their capitol gains will be anything above the $250K (individual) or $500K (married) thresholds.
     
  3. cubancigar2000

    cubancigar2000 Well-Known Member

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    See Obama is an honest man living up to his words. He is sharing the wealth
     
  4. slowdp

    slowdp TS Member

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    She is great. "Let's vote the bill in so we can find out what is in it." Well, we're finding out more and more and most of it is to move money from you to the takers (the ones who will not work).
     
  5. dmarbell

    dmarbell Active Member

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    Check the link above. Apparently there is not a sales tax on house sales.

    Recurvy,

    The gain exclusion is $250k/$500k of GAIN. That is, sales price above tax basis. It has nothing to do with whether your house is paid off or mortgaged to the hilt. If a couple pays $250k for a house and sells it for $750k, there is no tax (assuming they didn't buy it for $250k but had gain excluded under the old law, with trading up, etc., before this current law passed under Clinton. Then their tax basis might be less than the $250k, but that part is complicated).

    Danny
     
  6. Brian in Oregon

    Brian in Oregon Well-Known Member

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    What about the one time lifetime exemption for capital gain on a home sale? Is that still in play or is it gone now?
     
  7. timberfaller

    timberfaller Well-Known Member

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    Qwestion: Has anyone out there worked and recieved a regular paycheck from a "Poor" person or company?

    All my paychecks have come from someone who was "Rich" be it a company or person.

    my $.02
     
  8. Big Heap

    Big Heap TS Member

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    http://www.snopes.com/politics/taxes/realestate.asp00

    The Snopes website has a thorough explaination of this item. Another democrat gotcha.
    [​IMG]
     
  9. dmarbell

    dmarbell Active Member

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    Brian,

    I explained it above. Still in play.

    Danny
     
  10. grunt

    grunt TS Supporters TS Supporters

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    No congressman read the bill. They were busy draining the swamp..
     
  11. Brian in Oregon

    Brian in Oregon Well-Known Member

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    Danny, so it is "still in play" but with a cap on the exemption limit?
     
  12. recurvyarcher

    recurvyarcher Well-Known Member

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    dmarbell, what did I write that is different than what you wrote? I understand how it works completely, and I wrote the post trying to be fair and set the record straight.
     
  13. recurvyarcher

    recurvyarcher Well-Known Member

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    You can take the $250k/$500k exclusion of capital gains only if you used it as primary residence for two of the five years before the date of sale. The "once in a lifetime" is an old rule, and to my knowledge no longer applies. If you meet the two-year ownership and use tests for a principal residence, and don't sell more than one principal residence in any two-year period, you can exclude any capital gain tax on the sale up to the $250k/$500k limit. So it would be feasible to sell every 2-3 years and take the exclusion each time.

    If I am wrong, somebody in tax law or prep please let us know.
     
  14. bridgetoofar

    bridgetoofar TS Member

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    I'm going to fully retire in 2014 and relocate. I guess I'm selling before 2013 or I'm kissing about $45K away. This sucks.
     
  15. dmarbell

    dmarbell Active Member

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    Recurvy,

    Your post is essentially correct. The "paid them off" part could confuse some people. Folks get confused about tax basis vs. what they owe on the house.

    I have to go back and study the basis issue, but I believe if you have a house you acquired under the old rules of excluding gain as you traded up, your tax basis could actually be much lower than your current purchase money mortgage.

    Also, except for political purposes, I can't get too flustered by a tax that might start in 2013, because I have 2010-2012 to worry about and plan for. I don't believe the current administration and congressional makeup will survive for that long, and therefore this part of the legislation has a good chance of not being in place in 2013.

    Danny, CPA, CFP
     
  16. smoking357

    smoking357 TS Member

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    Chicago and suburbs have had a 1% sales tax on houses, for years.
     
  17. recurvyarcher

    recurvyarcher Well-Known Member

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    Danny, could you check that about the trading up and let me know? (only if you have time). I may have to take a look at that for the property that we plan on selling within the next 3 years.
     
  18. dmarbell

    dmarbell Active Member

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    Fun discussion of future tax rules so far. The link above is the publication on sale of your home. The cutoff for the old rules, about trading up to exclude the gain, was May 7, 1997.

    Any 3.8% tax would be on the taxable part of any home sale. So, the part that is taxable, above the $500k exclusion for married couples, which is also above the $250k modified adjusted gross income threshold for married couples, would be taxed at 3.8% extra. That is limited to the total investment income as defined, or the MAGI above the limit, whichever is less.

    The interesting part of this is that, apparently, if you incur taxable gain on the sale of your home, it could create the extra 3.8% tax on your other investment income, including interest, dividends, annuities, royalties, rents, other than such income which is derived in the ordinary course of a trade or business, and net gain (to the extent taken into account in computing taxable income) attributable to the disposition of property other than property held in a trade or business (extracted from Code Section 1411).

    Danny
     
  19. Dickgshot

    Dickgshot Well-Known Member

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    It's not a sales tax or an income tax. It's a Medicare tax like the one you pay on your salary and business income -except it's a tenth of a percent less.
    If you deferred gain on previous residences using the old "replacement " rule and you bought your current house prior to 1997, that deferred gain reduced the "tax cost" of your current residence and any gain when you sell it could be a lot more than you think.
     
  20. recurvyarcher

    recurvyarcher Well-Known Member

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    Nope, bought it after 2000. I'm good. Thanks, Danny.
     
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