There is a good bit of misinformation and simply a lack of explanation regarding the new 3.8 percent tax that will affect some real estate transactions taking place after Jan. 1, 2013.
The first key thing to understand is that this tax will not affect every person or transaction. When the legislation becomes effective in 2013, it may impose a 3.8-percent tax on some (but not all) income from interest, dividends, rents (minus expenses) and capital gains (minus capital losses).
The tax will apply only to individuals with an adjusted gross income (AGI) above $200,000 and to couples filing a joint return with more than $250,000 AGI.
Therefore, this tax should not be an impediment to the growing housing recovery in our market, where the average home price falls in the range of $170,000. There are few ZIP codes in our market that have an adjusted gross income higher than $200,000, and the means for computing the taxable income vary by transaction type as well.
The tax was approved by Congress in 2010 as part of the funding mechanism for the health care reform act. It is scheduled to produce $210 billion dollars over a 10-year period, more than half the total new expenditures in the health care reform package. While passed in 2010, the many features of this complex legislation have different starting dates; hence, this becomes effective in 2013.
It is unfortunate that during this election year, the misinformation surrounding this tax and its complex calculations is being used by some candidates to sway voters to their side. To help dispel the myths and misinformation, the National Association of Realtors has prepared a detailed brochure which explains the many complex facets of this legislation and how the calculations are applied. In an effort to support total transparency and supply clear information to our consumers, the Greater Chattanooga Association of Realtors would like to supply you with this brochure for free! Simply email us at this address: Info@GCAR.Net for your free, no-obligation copy.
The Greater Chattanooga Association of Realtors and its 1,300 members stand as the leading advocates for personal property rights and issues of real estate taxation in our region. We are not here simply to help you buy or sell homes, but also to serve you as an information and support mechanism as we each pursue the American dream of home ownership.
Mark Hite is president of the Greater Chattanooga Association of Realtors.