Q. I’ve heard that funding Obamacare requires a huge tax on real estate transactions. Does that mean that when I sell my house I’m going to get stuck with a big tax bill to pay for everyone else’s healthcare?
A: Not unless you’re very wealthy. If your income is under $250,000 for married couples filing jointly, or $200,000 for individual filers, you are not subject to the ACA real estate tax. That income threshold exempts nearly all Americans from this tax, regardless of whether they sell a home.
For people who do have incomes that exceed those amounts, the ACA’s Medicare surtax is 3.8 percent of capital gains (profit) on real estate transactions. The first $500,000 (for married couples filing jointly, $250,000 for individuals) in profit on the sale of a primary residence is excluded from the tax.
If those high-income households sell a vacation or investment property, all profits are subject to the tax. Remember that profit is not the same thing as sale price. The tax only applies to profits from the sale.
The income threshold means that most people are exempt. And the further exemption for the first $500,000 ($250,000 for individuals) in profits means that even in the high-income demographic, many people will not be on the hook for the Medicare real estate tax.
If Mitt Romney sells one of his homes, he’s going to have to pay the Medicare surtax. Most of the rest of us will not.
Have GOP efforts to repeal the ACA had any effect on the Medicare surtax?
GOP lawmakers’ attempts to repeal the ACA in 2017 generally included repeal of the 3.8 percent tax on capital gains, but none of those bills were successful. The GOP tax bill, enacted in December 2017, repeals the ACA’s individual mandate starting in 2019, but it leaves in place the ACA’s other taxes, including the Medicare tax on capital gains for wealthy Americans.