Starting in 2013, all real estate sales transactions will be charged a 3.8% sales tax as part of the new healthcare legislation!

Have you heard the horrible news? Starting in 2013, all real estate sales transactions will be charged a 3.8% sales tax as part of the new healthcare legislation! If you've heard about this you are not alone.

According to this common email going around the internet these days this new sales tax would mean that if you are going to sell your home for $500k you would owe the government an additional $19000 in taxes. The implications to the real estate community are astounding. It would take an already depressed sales market and make it worse! Yikes!

You have to love the internet, right? First of all, rest easy.. it's not true. Well, not exactly.

The origins of the email ARE rooted in the recently passed Patient Protection Affordable Care Act (PPACA) which calls for "high income households" to be subject to a 3.8% Medicare tax on investment income starting in the year 2013.

So YES, there is a new tax coming and YES it is part of the HealthCare Legislation.. but NO it is not specific to real estate.. and NO it's not likely to affect as many people as it seems. It IS NOT a sales tax, BUT IS IT ABSOLUTELY ridiculous? I think YES.

Regardless of what I think, here is the breakdown:

* "High income households" are defined as $250k for couples and $125k for individuals.

* It only effects "net investment income" which typically means excess of interest payments, rents, dividends, annuities, and some business income. It's a lot of stuff, but it is not specific to your home although the sale of your home (especially investment property) could be an overall factor.

* Specific to home sales. There is a capital gains exclusion for the sale of a primary residence that allows a "high earner" to sell for a profit of 500k per couple and 250k for individuals. You are only taxed the additional 3.8% on amounts above this threshold.

So is it likely to affect us? Maybe not everyone but the question remains... what is a increased capital gains tax doing in a HealthCare bill to begin with?

Let me know what you think my website is: http://www.biltmorebranch.com/ or shoot me an email at EMiller@PeoplesMortgage.com

Thanks for reading.  I couldn't find anything funny to add in this weeks blog... but since there is so much fighting going on in Wisconsin right now with Gov. Paul Walker.. I figured I would provide a video of another awesome Walker you may have heard of ... WALKER Texas Ranger!  I say send Chuck Norris in and settle it once and for all! 

And to answer your question... Yes, I believe it IS a Union Guy.  SAG.

It seems like common sense. 

"We will buy the house, and THEN we will upgrade it as we grow our family."  That's what my wife and I thought a little over 15 years ago when we purchased our first home.  We avoided the blinds or drapes, we got laminate flooring and counters, and did nothing with our backyard.  And by "nothing" I mean it looked like one of those Super X Motocross tracks ... only without the jumps.  In other words, we had a dirt yard.

This is very common, even today.  Pretty much everyone thinks they are going to do this thing or that thing to the house, but how many actually follow through with it?   

Fast forward to 8 years later and we still had the same laminate flooring, cheap counters, and same old dirt yard... only with new weeds.   In fact (and this is very embarrassing) for the first 2 years we owned the home we actually pinned up bed sheets for window treatments.  It wasn't just that we were modest and poor and I was lazy (emphasis on the WAS as it relates to housework).. but the fact is that anyone over 35 will tell you that life sneaks up on you.

After purchasing your first home, you may quickly find yourself dealing with more important issues like raising your children and making a living.  It suddenly became important to us when it became apparent that we NEEDED to upgrade the house in order to sell it. 

Our thinking at the time is also common practice today.  We will do the upgrades and repairs because we have to do it!  We justify it by the idea that we know we will get the money back when we sell... so it makes sense, right? 

And so it goes.... In order to best prepare the house for sale we needed to make sure the house would greatly appeal to the next buyers.  The question then becomes, how do you pick stuff that the next family might like?  Our answer:  Why not fix the stuff that has been annoying US for years?  That's logical, right?  The buyers will find this house appealing because they won't be annoyed... and ultimately that will lead to a quicker contract.

That's the sole reason why we upgraded.  It's the same exact reason many people upgrade this way today, with their finances in mind.  I’m not saying it isn’t worth consideration but in reality, it should take a back seat to something more obvious.  More on that later but for story continuity, here is what we did:   

* We put in a beautiful mosaic brick patio made from recycled materials.  This complimented our new (fully automated) lawn.  Note: fully automated.  Excellent feature! 



*Next, we got some discounted stone tiles from Home Depot and used them for a backsplash in the kitchen.  FYI:  Tile backsplashes look excellent, and they are super easy to install.  In addition, although not scientifically proven, I believe they increase homemade pie production.   

*We painted using our "pop-outs" as accent walls.  It was simple but effective.  Thank you HGTV!

*Rather than just replace the carpet, we tiled the whole house and put rugs down in the common areas.  Cha-ching?  Not really, it was actually cheaper.

*For the finishing touch we put in Plantation Shutters with sun screens.  Cha-ching?  Yep.  But I’ll bet we saved some money due to increased energy efficiency.

 

Anyway…  when it was done the whole place looked amazing.  We were sure that all these changes would help sell the home, and that's really the only benefit we expected from this process.  That is ... until we very unexpectedly started ENJOYING the home.   Oops.  (SEE VIDEO FOR HOW I FELT.) 

I found that we were taking Sunday lunches outside on the new patio while the kids played soccer on the grass. As they rolled around, laughing, the birds were chirping and the breeze was blowing.. I would sip ice cold lemonade and take in the perfect Arizona sun.  I know this will sound weird, but even though my house was humble I had never felt more successful.  

FYI#2:  I'm actually not making that up about the lemonade or birds or any of it .. all true. 

Inside the home, the tile floors made the home easier to clean (so I'm told.. ha ha) and saved a ton of time that was spent (apparently) steam cleaning the carpets.  Side note:  I had actually thought that we had self cleaning carpets but it turns out it's a lot of hard work to keep an 8 year old carpet presentable.  Who knew? 

*The shutters kept the house cooler that summer while they allowed a tremendous amount of light in the home making everything seem brighter.  

Our upgrades may have cost around 7k, but because everyone was so much happier the benefits were priceless.  This brings me to my point, MANY TIMES people make decisions regarding their homes based on the "dollars and cents" of it. 

But the fact is that sometimes it makes sense to spend a few dollars more to realize the full enjoyment of your home. 

 Our house did ultimately sell, but was it because of all the  upgrades?  I don’t know.  What I do know is that the time we had with the home before the sale was way more valuable than anything we could have possible put into it.

So if you can... my advice:  Go for it if you can afford it.

Thanks for reading.

There are lots of cool calculators on my website, if you want to check them out. ALSO, there is a funny video about communication if you click on the TV:  www.biltmorebranch.com