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I’ve heard that Obamacare included a tax on real estate transactions. When I sell my house, will I get stuck with a big tax bill to pay for everyone else’s healthcare?

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. Although those income thresholds are not indexed for inflation, they still exempt 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 $250,000 (for an individual; $500,000 for married couples filing jointly) 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 $250,000 ($500,000 for married couples) in profits means that even in the high-income demographic, most people are not 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.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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Joseph Farrell
Joseph Farrell
9 months ago

your last sentence has a missing word – ‘many people are NOT on the hook for the medicare real estate tax”

Louise Norris
9 months ago
Reply to  Joseph Farrell

Thank you! It’s fixed now.

Frank Goudy
Frank Goudy
16 days ago

Wealthy is not $250,000 for a married couple. Wake up it is 2021 not 1960.

Louise Norris
15 days ago
Reply to  Frank Goudy

The median household income in the US in 2020 was under $68,000: So a household income of $250,000 is 3.7 times higher than the median.
Even in San Francisco, a household income of $250,000 is more than double the median income:
So yes, $250,000 in household income is wealthy, any way you look at it.
And keep in mind that if a couple earning $250k+ sells their home and the profit is $400,000, this tax would not apply.

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