To the editor:
I was intrigued by Mr DeRosa’s letter of July 5 concerning a real estate tax on the sale of your home and decided to do some research.
It is true that the Health Care and Education Reconciliation Act of 2010 does include a Section 1402 titled “Unearned Income Medicare Contribution” and it does impose a 3.8 percent tax on profits from the sale of real estate, residential or investment that starts in 2013. It is not a sales tax or a transfer tax but instead is a tax on the profit made by selling the house.
There are income thresholds written into the law. If your adjusted gross income is less than $200,000 if you are single or $250,000 if married, you will not be subject to the tax. Up to $500,000 tax free exclusion of gain for marred couples filling a joint tax return and up to $250,000 for single taxpayers has not been repealed. The right to deduct mortgage interest and real estate tax payments has not been eliminated. You also need to have owned and lived in the home for two of the last five years. This means that most home owners will not be paying this tax on the sale of their primary home. However, this tax does apply to vacation homes as well. If you are planning on selling your vacation you need to find out how it will apply to you.
The money from this tax will be allocated to the Medicare Trust Fund, which is part of the Social Security System and therefore is called the Medicare tax.
This information was obtained from several sources including an article in the Washington Post by Washington lawyer Benny L Kass, Snopes.com and factcheck.com.
Ruth G. Timchak