For the past several years, the Million Dollar Question has been “How do you pay for a $16 trillion deficit”? There’s only one answer to that question: “In every way you can”. What does that mean? It means that after the elections later this year, the American People can look for lots of surprises including a Home Sales Tax.
Under the Healthcare Program recently confirmed by the U.S. Supreme Court, a 3.8% Medicare tax can be imposed on unearned income of high-income producers. This provision could apply to proceeds from the sale of real estate properties, possibly even to rental income received from investment properties.
Applying a Real Estate Tax to the sale of Real Property is not a new concept. Hawaii imposes a 9% tax on the sale of all property as a way to generate state revenue. The thought of the U.S. Government applying the same concept to help shore up deficit spending is not much of a stretch. Consider that according to the National Association of Realtors there were over 5 million homes sold in February alone. A new tax on the sale of homes could raise more than $210 billion each year.
Although the tax is designed to apply to high-income earners, it will likely apply to middle-class families as well. It is likely to have the greatest impact on the retiring generation. If the Medicare tax does end up applying to the sale of homes, it would mean a $3,800 reduction at closing for every $100,000 in sales price.
This may be another reason for homeowners thinking of selling, to sell now and save!