Oppenheim Law’s Summer School: Obamacare’s So-Called “Real Estate Sales Tax”

Hi, this is real estate attorney and legal blogger, Roy Oppenheim, “From the Trenches.” I wanna go over with you all today a little bit what’s going on with the Obamacare real estate sales tax. There’re a lot of misnomers out there that this tax is somehow going to destroy the real estate market, particularly, the residential real estate market in the United States. And I wanna make clear that, first of all, that is not the case. The only individuals who will be subject to this tax, and I know it’s a little complicated so just stick with me if you can, are those people who make $250,000 a year if they’re married, or $200,000 individually. But it doesn’t mean that you automatically going to be subject to that tax. You have to have also made a $500,000 gain on the sale of your home.

Now, maybe you know people who’ve made $500,000 on the sale of their home. After most…after all, most people have negative equity in their home. They certainly aren’t going to make a half million dollars in their homes. But let’s just for a moment pretend you are one of those people who make over $250,000 a year as a married couple, and you do have a $500,000 gain on your home. If that is the case, the increment over $500,000, let’s say you had a gain of $600,000, the increment, the $100,000 gain would then be subject to a 3.8% surtax, sales tax, increase in capital gains tax, whatever you may want to call it. And thus you would pay 3.8% on the $100,000. But that would only be if you made over $500,000 on the sale of your home. And again, most people are under water in this country…in Florida, and half the people are under water and throughout the country, at least a third of the people are underwater, so most people aren’t gonna be making a half million dollars on the sales of their home.

And further, you have to also be an individual making $200,000, or a married couple making $250,000. So the reality is that this Obamacare real estate tax surtax will have limited impact on the real estate market when it comes to residential. Now on the commercial side, it will apply to any commercial transaction. It will apply to the sale of second homes, it will apply to investment income real estate, and so there will probably be some drag on the real estate market as it relates to the commercial side.
But in terms of residential real estate generally, I think you all should just not really consider that a major factor in the equation.

Roy Oppenheim, “From the Tranches”, Thank you.