We have been receiving many questions about a federal real estate transfer tax enacted as part of the health care reforms in 2010. THERE IS NO SUCH TAX! Pay no attention to an Internet posting riddled with errors that is being circulated about such a tax. The National Association of REALTORS® has released a new brochure to help REALTORS® understand the facts behind this issue.

FACT: The health care legislation created a new tax that would apply to a portion of the gain on the sale of any capital asset (including real estate), but that tax will apply ONLY to individuals with more than $200,000 Adjusted Gross Income (AGI), or $250,000 AGI on a joint return. The tax does not apply to any amount excluded from taxation under the $250,000/$500,000 principal residence rules. The tax is never imposed directly on the full amount of any capital gain.

The tax is computed under a multi-step formula that captures only a portion of any gain and will only affect those with total AGI above the amounts noted above. Links are provided for a Q&A on the tax and to a brochure with examples of the tax.

The 3.8% Tax: NAR’s Q&A
The 3.8% Tax: NAR’s Brochure