Will 3.8% Medicare Tax Be Imposed on Home Sales?

An e-mail is making the rounds, stating:  “did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That’s $3,800 on a $100,000 home.” 

 Is this true?  The answer is yes, but only for people with incomes above $200,000 and who sell their home for a gain of more than $250,000 ($500,000 for married couples).

The National Association of Enrolled Agents explains it very well:

The trouble with many of these e-mail strings is that the original author either misstated or misinterpreted the underlying tax law. In this case, the original author was partially correct: the 3.8% Medicare tax will be assessed on certain home sales occurring after 2012. The sellers, however, must have income in excess of $200,000 ($250,000 MFJ) and, in addition, are still entitled to the $250,000/$500,000 exclusion from capital gains tax. For more details, this Washington Post article frames out the issue nicely.

(The above excerpt from the NAEA comes from a weekly news update for Enrolled Agents, published by the NAEA.  Learn more about EAs at http://www.naea.org/.)