CWA HEALTH CARE REFORM UPDATE: New Tax on Home Sales Myth

Does the Affordable Care Act impose a new tax on home sales?

This is a myth that has circulated around the internet for some time, despite multiple debunkings.

Here’s the truth: As part of a collection of new measures to fund subsidized insurance and improvements to Medicare, the Affordable Care Act included a new 3.8% tax on investment income for people making over $200,000 ($250,000 for married couples). This new tax would apply to capital gains on the sale of a home if the gain is in excess of $250,000 for a single person or $500,000 for a married couple.

So to summarize: this tax would apply only to taxpayers making over $200,000/year or couples earning more than $250,000 per year (meaning the top 4.2% wealthiest American households in 2011, according to the Census) and would apply to home sales only if the taxpayer made over $250,000 (or $500,000 for married couples) in capital gains from selling their home.

A study by the Tax Policy Center found that 80% of households in this country will pay nothing towards this new tax. Of the $123 billion that this new tax is expected to raise between now and 2019:

• 86.3% would come from the top 1% wealthiest households,
• 13.5% from the next wealthiest 4% of households, and
• 0.2% would come from households in the next 5%
• the next 5% would pay such a small amount that it can be rounded to zero.