Real estate misrepresentations
Remember the 1950’s game show “Who Do You Trust?” where couples needed to decide if their answer or the answer of their spouse was the correct one. It’s actually a question we should all be asking ourselves in today’s over abundant 24/7 newsfeeds on network and cable television, not to mention radio.
On a recent quiet sunny Sunday morning, I was reduced to the edge of rage before the clock struck noon. One piece of the rage was part of a Sunday morning talk show the other was a letter to the editor in the morning paper.
A reasonably well known national figure, in an effort to support the government’s attempts to help underwater homeowners, quoted a startling figure. He said that 90 percent of Florida homeowners were underwater. First of all, what I think he meant to say was that 90 percent of Florida mortgage holders were underwater, but even that didn’t sit well with me. It only took me and Google about 10 minutes to get the number straight.
The opinion of almost everyone commenting on this number is that between 44 percent and 47 percent of Florida mortgage holders are underwater. Now don’t get me wrong. That’s a terrible and very troubling number, however, it is not 90 percent. Since, unlike me, most people hearing 90 percent would just have accepted it and repeated it to others without verifying. This unfortunately is happening from all media pundits regardless of their political affiliation.
Of course, you don’t have to be a media pundit to get a letter printed in the newspaper. This particular one addressed something that has been going around the Internet for some months and one that I actually checked out a while back. Part of the new health care bill, which is currently awaiting a Supreme Court decision, contains a little known 3.8 percent tax on profits from selling your home designed to help fund Medicare. When this was first discovered, it was interpreted incorrectly by most, including the Sunday morning letter to the editor writer, as being a straight 3.8 percent sales tax on the sale of all homes.
Again although this is a very complex statute written into an already very complex piece of legislation, it does not impose a 3.8 percent sales tax on all home sales. The truth is that only a tiny percentage of home sellers will pay the tax, if indeed the law stands.
First of all, only those with incomes over $200,000 a year or $250,000 for married couples will be subject to it. And even for those with high incomes, the tax will not apply to the first $250,000 on profits from the sale of a personal residence or the first $500,000 in the case of a married couple.
For example, a married couple with a $100,000 income and $450,000 of capital gains on the sale of their primary home would not be subject to the tax. Even if their capital gain was over the $500,000 exemption, they still would not pay the tax because their income was below $250,000. This couple would need an income of at least $250,000 and have capital gains in excess of $500,000 before the tax would kick in and then only on the excess above the $500,000 capital gains. I know it sounds confusing, but the bottom line is this tax is being misrepresented as something all home sellers will be impacted by, and it’s just not the case.
It’s really important to check out the source before you hands down believe anyone from your bridge partner to the Sunday morning talk shows. Rememer what Ronald Reagan said, “Trust but verify.” Now that would a good name for a game show.