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September 23, 2010 1:18 pm ET

The following email has been widely forwarded.  Media Matters Action Network has written a response to the text below.  Please feel free to copy and paste it and send to your friends.


[note - all mistakes below are original to the text]


Hey everyone,

Thanks for sending this to me.  A 3.8% tax on all real estate sales wouldn't seem like the greatest idea, especially with all of the problems we have been experiencing lately in the housing market. Fortunately for us, this tax does not apply to ALL real estate sales.

I found some information on and PolitiFact, who both say this email is flat out wrong and give some background on why it is misleading.

So, there is a tax, and it's a Medicare tax that's pretty complicated.  The gist is that there is a small clause in the Patient Protection and Affordable Care Act (the new health care law), which describes a tax that will apply to the investment income of "high- income" people in 2013.  The tax would affect "the top-earning two percent of families" according to the Tax Foundation.  Read their report here:

One way to make investment income is by purchasing real estate.  Even still, only a portion (not all) of the profits that a high-income person would receive from selling property would be taxed. further explains: "The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won't apply to the first $250,000 on profits from the sale of a personal residence - or to the first $500,000 in the case of a married couple selling their home." 

They also give more examples of the types of people who would have to pay the tax:

  • A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
  • An "empty nester" couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.

You can find the full article here:

Next, for those of you who plan on retiring and downsizing to something smaller this tax will not affect you like the e-mail claims.  PolitiFact tells you why: "[I]f you're an empty-nester of any means, and you're thinking of downsizing, part of your profits are already tax-free. There are long-standing tax exemptions on the profits from home sales."  Read more here:

Finally, don't be fooled by everything you read!  I hope this information was helpful.  Thanks and talk to you soon. 


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