Alert
Close

Think you know AARP? What you don't know about us may surprise you. Discover all the 'Real Possibilities'

HIGHLIGHTS

Open

learning centers

Get smart strategies for managing health conditions.


Arthritis

Heart Disease

Diabetes

Most Popular

Viewed

Health Care Reform Explained

The New Health Care Law and Taxes on Home Sales

Your questions answered

home sales

— Tooga/Getty Images

Q. Is there a big new tax on home sales that is supposed to raise money to pay for health reform?

A. Readers from South Carolina to Washington state report there's an e-mail going around warning about the dire consequences of a new real estate tax included in the health reform law. They worry that more taxes will make it tougher to sell their homes. But the information they received leaves out some key details, including the fact that most people won't have to pay it.

It's true that, starting in 2013, the health reform law adds a 3.8 percent tax on unearned income such as investment or rental income, or the profit from the sale of a home. But there are two important exceptions to the tax: You only pay taxes on profit from a home sale above $250,000 for single people or $500,000 for couples. And the tax applies only to those wealthy Americans with individual incomes over $200,000 or over $250,000 for couples.

Plus, there are other criteria before the tax applies: The home sale must produce a profit, so any home that is "underwater" is exempt. Ranches and farms are also exempt, as are properties used for business.

If you don't meet all criteria, you don't pay the tax.

The money from this tax will help support the Medicare program.

The tax was designed to affect a very small minority of homeowners. Only about 4 percent of American households earn over $200,000 a year, according to the latest statistics from the U.S. Census, and 2 percent have incomes $250,000 and higher. So, at most, 4 percent of American households will face the health care tax. In addition, half of all existing homes sold for $178,600 or less, according to the latest figures from the National Association of Realtors. So most home sales do not produce a profit that could trigger the tax.

"We have been fighting the same rumor over and over that certain political groups have put out about this 'outrageous' tax," says Lucien Salvant, a spokesman for the association, which represents 1.1 million Realtors. "The vast middle class of folks are not going to be hit by this tax when they put their house up for sale."

For more details and examples of how the new tax is computed, go to the Realtors association website.

Susan Jaffe of Washington, D.C., covers health and aging issues and writes the Bulletin’s weekly column, Health Care Reform Explained: Your Questions Answered.

Topic Alerts

You can get weekly email alerts on the topics below. Just click “Follow.”

Manage Alerts

Processing

Please wait...

progress bar, please wait

Tell Us WhatYou Think

Please leave your comment below.

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

Reading eyeglasses eyemed 6 membership benefit health

Members save 25% on orders of $200 or more and get 25% off lens upgrades at glasses.com.

AARP/Walgreens Wellness Bus Stops in Clarksdale, MS

Members can get exclusive points offers from Walgreens and Duane Reade.

Member Benefits

Join or renew today! AARP members receive exclusive member benefits & affect social change.

Rewards for Good

Your Points Balance:

Learn More

Earn points for completing free online activities designed to enrich your life.

Find more ways to earn points

Redeem your points to save on merchandise, travel, and more.

Find more ways to redeem points