ObamaCare=3.8% tax on your home sale

Remember when Nancy Pelosi told us we had to pass ObamCare before we could find out what was in it? Well here’s another fun fact that’s just come out: There’s a 3.8% tax coming when you sell you house. This Snope’s report debunks the idea that it applies to all real estate sales but if you read it, you’ll see that it will certainly hit a huge number of sellers in Greenwich. Ain’t it grand being the golden goose?

(Hat tip, Glenn G)

39 Comments

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39 responses to “ObamaCare=3.8% tax on your home sale

  1. Anonymous

    So you go to Snopes, find out the truth, and still publish the post with the misleading headline that implies that there is some sort of 3.8% tax on all real estate transactions. You’re like a Republican version of the Soviet propagnda machine. Is it good for your politics? Then print it, truth be damned.

    This means nothing more than that if you’re a couple with an income over $250,000 (which, by the way, means you’re rich, don’t give me that “that’s not really that much” crap), and you make a profit off selling a home, you’ll pay a 3.8% tax on that profit. As the article says, very few homeowners will actually pay this tax.

  2. Dem from OG

    Actually, you only pay the 3.8% on the profit LESS the $500,000 cap gains threshold. So if you make more than $250,000 in annual income, and you make a $600,000 profit on selling your home (nice work, by the way), you’ll be paying a tax of $3,800, or less than 2/3 of one percent of the profit you just made on your sale.

    Sometimes I can’t tell if you purposefully mislead people, or if you’re just out to have a good time and don’t care about the truth all that much.

    • Sometimes I can’t tell if you purposefully mislead people, or if you’re just out to have a good time and don’t care about the truth all that much.

      The latter, usually : )

  3. Dem from OG

    Well, in my life, I’ve been both of those things, Chris. But it’s not at all stupid (or even controversial, really) to say that $250,000 makes you wealthy. Even in Greenwich. And I know that, because there are things called numbers and facts. And the fact is, the median household income in Greenwich (not individual per capita income, but median househould income) in 2007 was $168,779. Don’t believe me? Go to the U.S. Census Bureau’s database and see for yourself: http://bit.ly/9jOuJW.

    So, yes, if your household income is $250,000, you are well above the median income in one of the wealthiest communities in the country. You are wealthy. There’s really no way around that.

    • An intemperate remark on my part, Dem, and I apologize. But statistics aside, I think $250,000 is middle class. Figure half of that goes to taxes. You then have $125,000 to pay your mortgage put, say two kids through college at $40,000 a year (no financial aid at that income level) and what’s left? If I’m ever “rich”, it will mean i don’t have to worry about paying the bills. I’ll let you know when, if, that ever happens, but so far …

  4. Dem from OG

    Apology easily and happily accepted, Chris. I actually think passion is no vice, and as long as we can agree to disagree (or even agree to allow ourselves to be persuaded once in a while), we’re all for the better because of it.

    I understand that even families making $250,000 can feel strained. It certainly is tough to pay a mortgage and send two (or more!) kids to college. But it’s hard to put statistics aside here. Because “middle class” ought to really be a category that encompasses a broad swath of American families. And the fact is, fewer than 2% of American families make more than $250,000. For however many families there are struggling to pay the bills on $21,000 a month in income, there are an exponential number more families who can’t even dream of sending their kids to college in the first place. That’s not to wax sentimental, but it’s just a reality.

    So, if we’re going to say an annual income of $250,000 is middle-class, we also have to say that Greenwich is a middle-class community (after all, more than 50% of our households make do on less than $250k), and that as a country with a median household income of around 50k, we have no middle class.

    • That’s very gracious of you Dem, and I thank you. I’d love to see the middle class expand – in fact, I’d like to see every American become rich, but I think our tax policy prevents either one from happening. But I am certainly open to argument.
      Best,
      CF

  5. Fly Girl

    As I understand the tax (and I use the word “understand” loosely), the tax isn’t just on real estate transactions – it’s on all unearned income. To put it frankly, I’m screwed and I blame every one of you who voted Obama in.

    Bloomberg Business Week has a good article:

    http://www.businessweek.com/news/2010-03-18/health-bill-said-to-add-3-8-medicare-tax-on-unearned-income.html

  6. Dem from OG

    Fly Girl,

    You’re not quite right about that — the tax is not at all on “all unearned income.”

    First of all, if your annual earned income is under $250,000 per year (so, if you’re 98% of America), the tax doesn’t apply to any unearned income you make. Not even a little bit.

    If you do make more than $250,000 per year, the tax only applies to unearned income above $500,000. In other words, if you make $250,000 as a lawyer, and make another $400,000 in the stock market, you don’t pay the tax. Not even a little bit. If you make $250,000 as your salary, and make $550,000 from selling a piece of property you invested in, you pay a tax of 3.8% on only the $50,000 you made above the 500k cut-off. So, you’d be paying $1,900.

    That’s what this 3.8% tax is all about.

  7. Dem from OG

    Fly Girl,

    My apologies — I’ve made a mistake, and I’ll quickly correct it. I was still thinking about the real estate tax story, and that’s where the $500k exemption comes in (that’s how much couples can exclude from cap gains if they’re selling their primary residence).

    So: the 3.8% Medicare tax applies to the capital gains of individuals with an earned income over $200,000 and couples with an earned income of over $250,000. (Unless, of course, your capital gains come from selling your primary residence, in which case, you’ve got that exemption I talked about before.)

  8. Live from London

    Keep on complaining….you’ll get used to it.
    50% top tax bracket
    13.8% National Insurance (socialized med)
    17.5% VAT
    Non Domicile tax £30,000
    Council Tax (local)
    Petrol tax and various outher stealth taxes
    Private Health Insurance (also a taxable benefit)
    Private schools
    The US is a virtual tax haven…Europe is all taxed out.

  9. Fly Girl

    Thanks Dem, I appreciate any and all comments. ObamaMath leaves me cold (not to mention angry).

  10. Edgewater Republican

    Are we not all getting a bit whiny about Obama’s taxes? We complain about our national debt and the impending doom yet don’t want to do anything to fix it. The fact is we are where we are…blame it on Obama, or Bush’s war mongering or wall street but we need to bring our debt down before we turn out like Greece….and taxes and spending cuts are the primary way with spending cuts being difficult because of existing committments (primarily social security).

    Taxing the middle class (<$250k) is not popular and let's face it we are moving towards a model from the 1950's – 1970's where there was less of a gap between rich and poor…and anyway who are we going to tax to fix the problem? People making $50k? …taxes in the near term are invevitable to fix our current deficit issues….and besides the 60's were a great time even if you couldn't tell rich from poor…Right CF?

  11. Anonymous

    Jim Himes knew about this – he says he read the entire bill (but he says a lot of things) – and voted for it.

  12. Cos Cobber

    Edgewater, I dont completely disagree. I just hate the class warfare that has been used to sell the tax increases and the fact that we keep reducing the tax burden for the bottom 50% of the population at the same time.

    I’ll pay more (a return to the Clinton era tax rates is a fair middle ground), but I want everyone else feeling the pain too. Otherwise, it smells too much like redistribution to me.

    Btw, the tax code is already very progressive.

    http://www.taxfoundation.org/taxdata/show/25587.html

    http://www.taxfoundation.org/taxdata/show/23408.html

  13. Fly Girl

    Edgewater: While I agree with your comments, the taxes that aren’t on straight income, rather on house gains, unearned income, dividends, trusts, etc., are slowly killing many of us Baby Boomers – the 60+ age group who have saved to retire, not poor mind you, but comfortable. We’ve put our kids through college, paid for weddings, we’ve already downsized homes, we’re living off investments perhaps, then BAM, knock-em, sock-em. I can live on less, I’m not greedy or spoiled, but there needs to be some common sense approach to taxation, not passing line items within the ObamaCare bill that drastically alters people’s lives.

  14. SlappedAss

    If we pay Realtors only 1.2% commission after the 3.8% tax is implemented it will pay for Obama Care without any cost to home sellers.

  15. SlappedAss

    Forget Greenwich incomes, the average household income in the US is somewhere around $47K a year. In Lower Fairfield County its around $165K. Something like three times the national average. Unless you are a complete moron, spending every penny of that $250K a year, and then mortgaging your self up the ass, you are statistically, and relatively, wealthy. No matter what an on the down slide Greenwich Realtor may believe or publish on his blog, a 1/4 mil a year is considered to be in the top 2% of US national income, definitely wealthy.

  16. Old School Grump

    “Earned income” and “unearned income” are hardly new terms, but the increasing frequency with which they are being bandied about by politicians and pundits is not good news. “Unearned income” sounds just like “undeserved income” to people with a chip on their shoulder, and politicians are gearing up to exploit that big time. This little tax on this little slice is just the beginning.

    It’s really very clever; bashing “rich people” wont get you very far–it’s an old rant, plus there really aren’t enough of them–but going after people with “unearned income” sounds so righteous and right.

  17. Priapus

    Dem from OG,
    Please spare me the “doesn’t apply to 98%” nonsense.

    “THEY CAME FIRST for the rich people
    and I didn’t speak up because I wasn’t really rich.

    THEN THEY CAME for the legal immigrants,
    and I didn’t speak up because I wasn’t an immigrant.

    THEN THEY CAME for the middle class,
    and I didn’t speak up because I wasn’t really still middle class.

    THEN THEY CAME for me
    and by that time no one was left to speak up.”

    I want you to remember where you heard this, and you won’t still be able to find me to complain to when it’s too late.

    There WILL be capital controls in this country soon and your ability to have YOUR capital leave the country will be halted because the “currency will be too volatile”. Your right to own gold will be taken away, and your currency will then be devalued. Outrageous? Go read your history. Yes, THIS country, under a similar DEM regime less than 100 years ago. Look it up. As the pseudo intellectual limosine liberal bumper stickers used to say during Bush, “if you aren’t outraged, you aren’t paying attention”.

    And have a nice day.

  18. Democrat from OG

    Old School Grump — it’s a bit rich (pun intended) to talk about people “going after” unearned capital, particularly when it’s so privileged under the tax code.

    And Fly Girl, I appreciate the dialogue, too! If you’ve saved to retire and are living off your investments, that’s great. The capital gains tax you pay on that kind of capital income is at a lower rate than what you would pay if it were labor income — so I do think it’s a bit of a stretch to say that you’ve been knocked and socked. You’ve been taxed, and it was a great Republican, Oliver Wendell Holmes, who said that taxes are the dues we pay for living in a civilized society.

    Look, no one likes paying taxes. Not even Barack Obama, who paid a great deal more than most of us did last year. And Cos Cobber — that return to the Clinton-era levels, what you call “a fair middle ground,” is exactly what the Obama administration is proposing.

    Edgewater Republican sounds like a downright leftist compared to what we normally hear these days from Republican elected officials. But his views would have put him in the solid mainstream of the Republican Party of yesterday (and not even that long ago — both Reagan and H.W. Bush agreed to sensible tax increases during their presidencies).

    Look: if you’re a die-hard Republican who opposes each and every tax increase, or a Yellow Dog Democrat who shudders at the idea of cutting spending and weakening the social safety net, the fact is, we get 19% of GDP in taxes against 26% of GDP in public spending. We’re going to have all give a little here. You can cut out all of the waste, fraud and abuse in government and you’ll have the equivalent of pennies under the couch cushions when it comes to our long-term structural deficits. Republicans are going to have to agree to sensible tax increases, and Democrats are going to have to offend some important constituencies and push for serious spending cuts, too.

    This notion that we can rebuild a structural deficit without ever increasing any taxes is pure folly — as is the notion that we can tax our way to surpluses. But right now, Republicans’ dogmatic opposition to any discussion of tax increases makes it unlikely that serious spending cuts will be politically feasible. (And when Americans are asked what they want, it’s great schools, better roads, a stronger military, and less spending, so, the politics here are incredibly complicated.)

  19. Fly Girl

    Dem from OG: You sounds Fair and Balanced as my buddies on Fox would say. Perhaps your FWIW moniker should be “Independent in OG”.

    • I agree, Fly Girl – I do like people who can argue facts and not resort to caling their opponents Nazis, and Dem from OG is one of the good ones. But yeah, let’s at least make him an Independent! (Don’t tell him – we’ll work on this quietly).

  20. Democrat from OG

    Priapus,

    Yikes. First of all, I’d just say that it’s probably not a great idea to appropriate the “First they came for the…” poem, considering that it was written by a Nazi resister protesting, you know, genocide, and not a 39.6% marginal income tax rate. It’s in poor taste.

    Look, the 98% isn’t “nonsense” — it was just a statistic, and it was a fairly limited one. It’s just a fact that 98% of Americans make less than $250,000 in income per year. If you think that’s wrong, your gripe isn’t with me, it’s with the U.S. Census Bureau.

    As for all the anger about what a “similar DEM regime” did 100 years ago — 100 years ago, half of my family wasn’t yet in this country. And the half that was, was Republican. Because 100 years ago, there were Republicans like Teddy Roosevelt, who recognized that government had a role in trying to achieve some sort of balance between private interests and public purpose.

  21. PInzgauer

    I don’t understand why anyone could be in favor of any kind of tax. Even if you are in a segment that might benefit from it in the short term, the long term outlook is grim for everyone.
    Believe me, I’ve been there.
    To squabble over what defines “rich” completely misses the point – in my opinion.

  22. Fly Girl

    Hey, we don’t know that ‘Dem in OG’ is a HE! Smart women write on this blog too! 🙂

  23. SlappedAss

    All the rich Democrats and Liberals who voted for Obama should have no problem paying these new taxes. “Yes we can” and “Change we can believe in” now we are facing massive tax increases, and hand outs for people who don’t want to work. The older generation will be faced with diminished savings, and less health care coverage. Its what the majority of American’s wanted by voting this clown into office. I hope everyone enjoys “the change”, because that is all anyone will have left in their paycheck, change.

  24. Dem from OG

    Pinzgauer,

    Do you really mean to say you’re opposed to any and all kinds of taxation? I take that to mean that you don’t use interstate highways, haven’t served in the military and don’t think we need one, and think that police and firefighters are unnecessary, too.

    Or should we just privatize every public good?

    • Sell the roads! It’s what made this country great. (I think, but am not certain, that the stone building across from the “Hole” on W. Putnam is an old toll house – certainly looks like one).

  25. Dem from OG

    Selling our roads made the country great? Also trying to picture the stone building you’re talking about…where is it?

  26. Old School Grump

    Dem in OG at 11:03–I guess you’re among the crew who approve of The New Semantics. What you refer to as unearned capital is known to many of us as savings and investments.

  27. Dem from OG

    Old School Grump,

    I was only referring to it that way because that’s how it was originally referred to by Fly Girl earlier in the thread. I’m fine calling it capital gains, investment income, et cetera. It’s still privileged under the tax code.

  28. Dem from OG

    For the record, I also have no idea what The New Semantics is. Sounds like a good band.

  29. Old School Grump

    Dem from OG at 3:08, I believe the “privileged” (interesting word choice!) tax status of cap gains, etc. is meant to serve as an incentive to save and invest. Saving and investing are good things, remember? Or at least they used to be. Now, apparently, they are the selfish activities of people awash in unearned income that gets privileged treatment.

  30. Priapus

    Den from OG-
    Why not worry less about labels and categorizing commentary and more about susbstance. I have no problem paying taxes. I just hate to see them wasted on useless social programs. Your use of the word “privileged” is the most telling part of your strings. Capital that produces investment and companies and jobs, with a multiple seems far more useful than shovel ready nonsense that our current (but soon replaced) dopes in Washington can comprehend. So painful the populist tripe is to read, surrender. Until November

  31. Dem from OG

    Grump & Priapus,

    Guys, really, take a breath. I didn’t invent the term tax privileges — it’s a legal term, and all I was doing was pointing out the indisputable fact that labor income (call it whatever you want, wages, salary, etc.) is taxed at a different rate than capital income (call it whatever you want, dividend income, investment income, whatever.)

    That’s not a statement of opinion. Just the way the tax code is written.

    And yes, Grump, the difference in taxation is meant to “encourage investment” — although I really don’t buy the argument that if people had to pay income tax on money they made off investments, they’d suddenly stop investing. It’s like the argument that progressive taxation is a disincentive to work. Of course it isn’t. The more money you make in base pay, the more you’ll take home after taxes. There’s no point at which it doesn’t make sense to get a higher salary.

    Anyway, off to enjoy the weekend in the socialist utopia of Sound Beach. Maybe I’ll reread Das Kapital on the shores at Tod’s. Who knows?

  32. Old School Grump

    Dem from OG, this will sound odd, but I’m actually pretty liberal! I might even be amenable to a tax increase if I had ANY confidence that the government will pursue the necessary spending reductions with the same vigor it will pursue the necessary tax increases. (I have no such confidence, but that’s a different rant for a different day.) Also, I did know that “unearned income” is the correct tax-code term, and I believe you when you say “privileged” is as well.

    My point is this: I am deeply suspicious of the way the administration is framing the issue of tax increases. Like I said in my original comment, “unearned income” translates promptly into “undeserved income” to people who are looking for someone to blame for whatever it is they don’t like about their economic lives. I think the Obama administration and many in the House and Senate (including some Rs) are utterly delighted to fan these flames of class-warfare-in-the-making.

    Everyone (D or R) who wants to be elected or reelected can benefit from being perceived as “champion of the average guy,” which requires demonizing those who have more money. If this involves conflating ordinary people who socked away some money over the decades with 26-year old derivatives-trading multi-millionaires, what the hell do they care? If they can get your vote by cultivating your hatred for anyone who has 2 bucks more than you have, they will do so.

    P.S., I have an acute distaste for doublespeak. If a politician says “We’re going to increase taxes on your dividend income and capital gains because we need the money and this is an easy way to get it,” I’ll respect them for their directness even as I vote against them (and they win anyway), and then I’ll pony up the $. But give me Robert Reich on NPR chirping about “fair share” and I’ll go into a tailspin of despair. To paraphrase Judge Judy, don’t piss on my leg and tell me it’s raining.