Health Reform: 4 Percent Home Sale Tax is Myth
Information circulating on the Internet claiming health reform includes a 4 percent tax on home sales is incorrect. Starting in 2013, the law imposes a 3.8 percent Medicare tax on households with adjusted gross income (AGI) of more than $200,000 for individuals ($250,000 for married couples), a portion of which is "net investment income."
Since capital gains (profit) are included in the definition of net investment income, an additional tax obligation for these households might result from the sale of real property, but for many households the tax obligation WON'T apply to gains from the sale of a principal residence. On the sale of a principal residence, the existing $250,000/$500,000 exclusion from capital gains (profit) remains unchanged. The tax would be on any profit over $500,000 made on the sale of a house that was owned by a married couple.
Consequently, even when the AGI limits are met, the new tax would apply only to gains (profit) realized in excess of the $250,000 single person/$500,000 married couple exclusion that push AGI over the $200,000/$250,000 Medicare tax limit. (From: National Association of Realtors; Tennessee Association of Realtors)