Michigan Association of Realtors

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Healthcare Bill and the Real Estate Sales Tax Explained
2/22/2011

Recently the Michigan Association of REALTORS® has received numerous e-mails concerning a provision in the health care bill that requires a 3.8% sales tax or transfer tax on the sale of a home.  We understand your concerns regarding this provision in the health care bill and would like to clarify this issue.
 
The health care bill does include a provision which imposes a 3.8% tax on the net investment income. The tax applies only to those with Adjusted Gross Incomes (GSI) of over $200,000 a year or $250,000 for marred couples filing jointly. Even if the income is met, the tax does not apply to the first $250,000 on gains from the sale of a principal residence or to the first $500,000 in the case of a married couple selling their home. Therefore, if the gain of the sale of the primary residence is below that amount, no tax will have to be paid.  Similarly, the tax is only applied to the lesser of the gain or the amount above the AGI thresholds.

Some home sales would see a tax increase under this bill; however, it would have to be a principal residence that generates a gain of more than $250,000 or $500,000 for a couple, or a
2n
d home/investment property. A typical home sale would not incur the tax. In a report released by the Tax Foundation, it stated that the tax will hit only the top-earning two percent of families. Therefore, for the vast majority, the 3.8% tax will not apply.
 
If you have additional questions about this issue, please visit the National Association of REALTORS®website http://www.realtor.org/small_business_health_coverage.nsf

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