We at the ARA have been dealing with calls about the “so-called” transfer tax on real estate. This is an internet urban myth (apparently in the form of an email) that will not die. Yes there is a 3.8% tax. It is NOT a sales tax or transfer tax on the sale of a principal residence. It is a tax that will apply ONLY to people with more than $200,000 ($250,000 on a joint tax return) of adjusted gross income.
It is impossible to predict who will owe the tax and how it will apply to them. This is because the burden of the tax is determined by the mix of an individual’s earned (commission, salary etc) income and an individual’s investment income (interest, dividends, cap gains). The tax is based on a formula where you make several computations, compare the results and then pay the 3.8% additional tax on the smallest of the numbers you come up with.
The bogus claims made online and in emails are reportedly the result of an opinion piece that ran in in a Spokane, Washington newpaper more than a year ago. The following are links to the most important information on the National Association of REALTORS website. If you have any questions please feel to call Amy Hair at the Arkansas Realtors Association (888.333.2206) or email her at AHair@ArkansasRealtors.com for more information.