Q: I have been informed that as of Jan. 1, as a part of the Affordable Health Care Act (commonly referred to as Obamacare), a 3.8 percent tax will be assessed on all home sales.
What is your estimate of the impact of this new law on the local real estate market, and what, if anything, is the Greater Las Vegas Association of Realtors attempting to do to mitigate the effects of this new law?
– Nelson O., Las Vegas
A: This has been a persistent rumor and a source of considerable misinformation for many months.
To get to the bottom of this, I enlisted the help of Deanne M. Rymarowicz, the legal counsel for the GLVAR. After hearing such statements for some time, she recently wrote an article to better inform local real estate professionals and the public. I’ve included an excerpt here:
“True or false: The federal health care reform legislation includes a 3.8 percent real property transfer tax. False.
Although rumors are swirling throughout the real estate industry that there’s a new federal tax on property transfers, there is no such animal.
“The health care reform law did include a last-minute addition aimed at helping to pay for some of the costs of the reform. The 3.8 percent is a new tax (effective Jan. 1, 2013) on certain investment income of high-income individuals (earning more than $200,000 a year) and married couples (earning more than $250,000).
“Importantly, the capital gains exclusion of $250,000 for an individual selling his or her home and $500,000 for a married couple remains intact.
“Like all tax issues, this one is complex, and the 3.8 percent only applies in certain situations after complex calculations. The National Association of Realtors has put together an informative brochure (see www.lasvegasrealtor.com/Files/legal/NAR3_8taxbrochure.pdf) and an article and online video (http://speakingofreal
estate.blogs.realtor.org/2010/11/24/the-3-8-tax-is-not-a-real-estate-transfer-tax/) with more details.”
So, to answer your question, this is not an across-the-board tax on all home sales as some have suggested.
As Realtors, we are not in favor of any new taxes that would discourage the sale of a home. But this is not a simple case, in part because stock portfolios and any investment income homeowners may have play a part in the adjusted gross income criteria in this tax.
I don’t expect this tax to affect many local homeowners. Unfortunately, most local homes being sold here today do not have the equity in them that they once did, if any at all, so this issue may not play a major role here in Nevada.
In any case, it would not be a charge at sale, but rather when you file your annual tax return. If your adjusted gross income is above those levels, you may be subject to such taxes.
As with all such financial matters, it’s best to check with your tax adviser.
Kolleen Kelley is the 2012 president of the Greater Las Vegas Association of Realtors and has worked in the real estate industry for more than 30 years. GLVAR has nearly 11,000 members. To ask her a question, email her at email@example.com. For more information, visit www.lasvegasrealtor.com.