Cambridge MA Real Estate Sales Tax....Myth or Fact
There’s nothing like the subject of taxes that can rev up a room full of political activists both sides of the aisle.
Question 3, the ballot question regarding the proposed changes to the Massachusetts sales taxes law was the hot topic at a recent gathering of Cambridge residents. Opinions bounced around. The usual grousing about government waste and the need to stimulate economic growth by cutting the sales tax was countermanded by the voices supporting the preservation of the sales tax to support social and municipal services.
One thing lead to another and the conversation eventually swirled into a lively discussion about how the Federal government was going to implement a 4% sales tax on the sale of real estate. What! You say. A sales tax on Cambridge MA real estate. That notion really got the room excited, and not in a good way.
It turns out the story started last spring. It bounced around the Internet before fact and fiction were separated. Emails circulated so vociferously though out the real estate industry that the National Association of Realtors published a “Myth Busters” document on Realtor.org.
This is how it started last April.
An opinion piece in the Spokane, Wash., Spokesman-Review reported that the health care bill contained a provision for a 4.0 percent “sales tax” or “transfer tax” on the sale of a home. That message was quickly circulated coast to coast. The Portland (Ore.) Oregonian wisely had someone do some old-fashioned fact-checking, and they reached a correct conclusion that was published Tuesday, April 27. Six months later, the news recirculated.
This was the real, but not simple, story: “The health bill included a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have “net investment income.” Any revenue collected by the tax is dedicated to the Medicare hospital insurance program. This new tax applies only to households with Adjusted Gross Income (AGI) of more than $200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property. Even if the AGI limits are met, the new tax would not be applied to capital gains that result from the sale of a home, since the existing home sale capital gains exclusion rule still applies – $250,000 (individual)/$500,000 (couple). So if the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid on the gain. The new Medicare tax would apply only to a home sale gain realized in excess of the $250K/$500K that pushes the filer’s AGI over the $200K/$250K income limits. “
Everyone at the event did agree that the last thing the real estate market needed was a sales tax that would further impede the recovery that is so badly needed. So, it turned out we did have partisanship on the subject of taxes.
For further information go to FACTCHECK.ORG, and search “3.8% sales tax on real estate.”
For information on home buying and sellling visit Avenue3re.com
Debby Heffernan, Principal