ObamaCare’s 3.8% Capital Gains Tax on Home Sales

Did you know ObamaCare Imposes a 3.8% Capital Gain Tax on Home Sales?

I discovered this fact on a great site I highly recommend by the Tax Foundation.  On it you will lots of information that will probably turn your face from blue to red by Election Day.

The Tax Foundation blog reports that the recently approved ObamaCare health reform legislation imposes capital gains taxes on some home sales made by married couples making more than $250,000 in adjusted gross income or $200,000 if single. The capital gain must exceed $500,000 if the house is your primary residence and a married couple or $250,000 if singles.  Got a vacation house?  No exclusion for that one.

There are plenty of people here in California and elsewhere who dream of once again having such equity in their homes—and if you ever get there the Federal Government will want 3.8% capital gains tax if you meet these threshold tests.  But just like the alternative minimum tax the “gotcha” in this home capital gains tax is that the provision is NOT indexed for inflation meaning each year more and more people become subject to the tax.

What does this have to do with healthcare, you ask?

Only the chilling reminder that the Government is going to tax everything that walks, quacks and breathes, everything you sell, invest in or play with in order to pay for the aspirations of our politicians.  And if you have anything left when you finish your bucket list—and kick that bucket—the Government will want that too.



  1. Update (9/27/2010)

    Apparently one of the sources of this misinformation is an April 8th blog post from GOP.gov (official website of Republicans in Congress). Nowhere in the blog post does it mention the fact that only those tax returns with incomes exceeding $200,000/$250,000 would be hit. Furthermore, it doesn’t mention the huge primary home capital gains exclusion that the tax code already has, which means that only a small fraction of home sales even have a capital gain that is subject to taxation. It’s a terribly dishonest blog post whatever your views on health care reform are.

    c’mon, man…

    1. To bury a capital gains tax on homes in the fine print of an already bloated health care bill is the bigger dishonesty. I said we can only hope to have equity in our homes again let alone have to worry about capital gains. But worry not, the bill deals with that too by non indexing the among taxable to inflation so that by the time we do have a gain it almost surely will be taxed.

  2. virtually all legislation contains provisions that have little to do with the primary purpose of the legislation. so if that’s “dishonest,” then virtually all legislation is dishonest. in any event, what’s in the law is the law. it’s right there. you can read it. nothing dishonest about that. lying, mischaracterizing or exaggerating what’s actually in the law, well that has to be “more dishonest.”

    the thing is, someone turned me on to your site because of the useful commentary about the utility and energy arena. and that is useful. just wasn’t expecting ideological blinders. my bad.

  3. I just saw this article and its associated comments.

    While we can all quibble over how to pay for the expansion in health care coverage, the fundamental fact is that ObamaCare is a dramatic step in the right direction. The US is the only advanced nation in the world that doesn’t provide its citizens with universal health care. Do American citizens deserve any less than say the French or the Japanese?

    No doubt the cost will be high for providing these benefits to the poor and disadvantaged in our society and the rich and well off will be called on to bear much of that cost. Seems to me, this is as it should be.

    Since 1980 the top five percent of the US population (roughly corresponding to the $200,000 threshold in ObamaCare) has enjoyed unprecedented increases in income and wealth while the rest of our citizens have barely kept up or have lost ground. Is this because the top five percent is more productive, harder working, morally superior, blah, blah, blah, therefore more deserving? Do bond traders, hedge fund managers and K Street lobbyists contribute more societal value than do teachers, nurses, firefighters and policemen? Gimme a &@*$^$ break!

    The problem is that our politico-economic system selectively rewards some activities disproportionately more than other activities which are at least as important to the functioning of society. When a politico-economic system doesn’t support the well being of the majority of its citizenry something is fundamentally wrong. Sadly, that is were the US is today.

    1. Bob, you are drinking too much of that kool-aid! ObamaCare does little to solve the underlying problems of rising health care costs. It also drives us toward a European style of socialized medicine i just don’t think Americans want. The process used by the Democrats to approve it was hardly an effort at finding common ground so if they want to live by the cram-down they risk that their strategy will also die by it when the majority changes in Congress again. Such uncertainly does little for the American people, does not solve the problem but produces huge campaign contributions for members of Congress. What a deal! How many struggling Americans are going to be helped by that kind of health care system.

      If we are serious about fixing the problems of health care we would do the following:

      1. ENCOURAGE NATIONAL HEALTH CARE INSURANCE COMPETITION. By allowing insurance companies to compete for customers offering a variety of plans without coverage mandates for each state, consumers could pick and choose the plan that best fits their needs and budget. To do this the Federal Government would need to preempt the states to authorize interstate competition for health insurance plans just like we have interstate wireless communications plans.

      2. CHANGE THE TAX TREATMENT OF HEALTH INSURANCE PREMIUMS TO ENCOURAGE SHIFT TO PRIVATE PLANS. Today the health insurance system depends upon employer provided coverage which is tax deductible by companies and tax exempt to employees. But individuals must pay for health insurance with taxable dollars and are subjected to higher premiums because they get lumped into higher risk categories. This system no longer serves us well because it deprives consumers of choice and undermines competition which would drive down health care costs. A better strategy would be to make employer contributions for health care taxable income to employees and make health insurance premiums paid by individuals tax deductible up to a reasonable level that represents the average premium paid.

      3. HIGH RISK POOLS. The government can address the problems of the uninsured or high risk categories by creating pools and even providing subsidies if desired to make coverage more affordable. Insurance companies should be prohibited from dumping insured who become high risk and instead a re-insurance pool should enable high or higher risk individuals to supplement basic insurance with high risk insurance to cover their conditions. The government could expand the tax deductibility of high risk premiums if desirable.

      4. END COST SHIFTING. A truly competitive system would need rules to eliminate the ability of hospitals and health care providers from shifting costs to other patients through outrageous fees and charges. This would force cost control and enable patients to force health care providers to compete and drive down the inflation rates for health care. The Government would then have to bear its true cost for providing coverage to Medicare and other government paid patients rather than enable providers to shift that cost to other patients as a hidden tax.

      5. MEDICARE TAX. If the true costs of providing Medicare coverage are bankrupting the system I’d favor some increase in the but it should be capped at CPI or some other non-health care index of inflation to force competition in the system.

  4. Gary,

    I agree with all of your fixes but I don’t think they would be enough. The problem is that the medical services industry is not competitive and wields huge amounts of market power. The big costs are not the medical practitioners but rather the pharmaceuticals, biotech’s and equipment manufacturers. They typically enjoy patent protections for decades and charge unconscionable mark-ups on their costs.

    I don’t know what the answer is but I do know that what we have isn’t working very well. People in these industries are getting hugely rich while the general population is having trouble paying for decent health care. Isn’t this why we regulate utilities? Unfortunately, the medical services industry is far more complex. So how do we reconcile incentives for innovation while restraining prices to affordable levels. Two thousand dollars for an MRI is unconscionable.

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