There Is No 3.8% Real Estate Transfer Tax – Sort Of.

A friend emailed me this weekend – “What the redacted?! Obama slipped a 4% real estate tax into the health care bill!”

Washington Houseboat

It's a house. On a boat. Get it?!

Ah, the rumored 3.8% real estate tax.  First things first – it’s not true.  Kind of.  And this is not a post on politics, so take your political commentary elsewhere, please.

Rumors were circulating last year that the health care bill that was signed in 2010 contained a 3.8% transfer tax on real estate, and that the tax would be put in place beginning in 2013.  While it’s true that there is a tax of 3.8%, it’s nto a tax that many people are going to see – unless you make a lot of money every year, and you make a boatload of money on the sale of your house.

Here’s how to avoid the tax.

  • Make less than $200000 as an individual, or $250000 as a joint couple
  • Make less than $250000 as an individual on the sale of a house, or less than $500000 as a married couple
Pretty simple.  There’s a tax, yes, but it’s only on high-income, high-profit households.  If you make less than $250000 a year as a couple AND make less than $500000 on the sale of a house, you won’t pay any transfer tax of 3.8%.  There’s a brochure you can download to find out even more.

Perhaps the title of this post should be How To Avoid Paying The 3.8% Real Estate Transfer Tax.

Updated 2/23/12 – The KCM folks recap it on their blog, as well, if you want another explanation.

Photo credit.

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