Chances are, you have received emails warning that the health insurance reform law contains a provision for a sales tax on homes.  Some versions cite an editorial column from the Spokesman-Review newspaper, while others link to one or more blog posts.  The information contained in these emails is false.  Below are the facts:

Beginning in 2013, the health insurance reform law will impose a 3.8 percent tax on unearned net investment income, which includes some (but not all) income from interest, dividends, rents (less expenses), and capital gains (less capital losses).  The tax falls on only those individuals with an adjusted gross income above $200,000 for single filers or $250,000 for couples filing jointly.

The tax will not be imposed on all real estate transactions.  Those who claim otherwise do not understand the interplay between the health insurance reform law and existing real estate tax law.  The exemption for the first $500,000 of capital gain from the sale of a principal residence remains intact and is not impacted by the new law.

Because the tax is very complicated, the National Association of REALTORS® prepared an informational brochure outlining several scenarios that could be relevant to you and your clients.  The brochure is available for download here.  You may also want to review NAR’s list of frequently asked questions about the health insurance reform law and the 3.8 percent tax on unearned investment income.

Please share this information with your clients and colleagues.  If you have any questions, please contact Governmental Affairs Director Robert Broome at robert@abr.org.  

By Robert Broome
Governmental Affairs Director