Dear Mr. Premack: My wife and I are planning on selling our home in the near future. We are afraid that we’ll be exposed to the new $15,000 Obamacare tax when we sell. We think it is grossly unfair for the government to take our money like this. Is there any exemption or way around this terrible new tax? – MP
Let me begin by respectfully stating that your understanding of the new tax is almost entirely wrong. When Congress passed the new health care bill, they did indeed include a new tax. But it is not a blanket $15,000 tax on the sale of all homes (that was just an internet rumor). It is, in fact, a comparatively minor tax that most people will never have to pay.
We all pay taxes on our homes. Locally, we pay property taxes every year. On the federal level, our homes are subject to capital gain taxes when sold (after various are applied). Whether unfair or not, these old taxes affect all homeowners, have been imposed for decades and their legality is accepted. The new tax included in this health care law is also legal but will affect a small minority of homeowners.
Here is how the new tax works. It starts in year 2013. It is imposed on taxpayers who have taxable income above $200,000 (for a single person) or above $250,000 (for a married couple). If your income is below those levels, you are entirely exempt from the new tax.
For those exposed taxpayers, the new tax is 3.8% of “net investment income.” When a homestead is sold, the capital gain exemption is applied. Any single person selling a homestead receives up to $250,000 in gain without having to pay capital gain tax. A married couple exempts up to $500,000 in capital ga