It’s a Penalty. It’s a Tax. No, It’s a Penalty. Huh?

1 Aug

MetroBoston, Publication Date July 18, 2012
By Attorney George Warshaw

The legality of new federal health care law was upheld by the Supreme Court under the taxing authority of Congress.

Whether you view the law as imposing a penalty, as some claim, or a tax, as others claim, may depend on your political viewpoint, but when it comes to real estate it’s clearly a tax.

Beginning 2013, the new health care law imposes a tax on the sale of certain real estate to help pay for the new law. While the sales tax won’t hit everyone (technically it’s a tax on profits), it will hit many.

The good news. You will likely not have to pay a tax on the sale of your home if your adjusted gross income as an individual is under $200,000 ($250,000 if married filing jointly) or the profit from your sale was not enough to impose any capital gains tax.

The bad news. You may be subject to a 3.8% tax on any profit from the sale of a second home or rental property or, if you are a high income earner and are subject to capital gains taxes on the sale of your primary residence.

Check with your tax advisor to see if the new real estate tax applies to you. © 2012 George Warshaw

George Warshaw is a real estate and estate planning attorney in Massachusetts. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts for individuals and families. George welcomes new clients and questions at


Legal Advice: Laws, and court decisions interpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship.


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