"Obama will charge a 28 percent tax on all home sales."
Chain email on Tuesday, July 22nd, 2008 in a chain e-mail
Not Obama's policy
Here, we'll look at the e-mail's claims about home sales. For an examination of the e-mail's other claims, read our full article here .
The e-mail says McCain will leave the existing capital gains taxes at 0 percent on home sales of up to $500,000 per home for couples, while Obama proposes a 28 percent tax on all home sales.
"If you are heading toward retirement and would like to down-size your home or move into a retirement community, 28% of the money you make from your home will go to taxes," the e-mail states.
First, let's briefly explain what capital gains taxes are. A capital asset is "almost everything you own and use for personal purposes, pleasure or investment," says the Internal Revenue Service. If you sell an asset and make a profit on it, that's a capital gain. Capital gains taxes vary depending on the tax filer's income and how long they held the asset, but generally taxes on capital gains are measured by the long-term rate for upper income tax brackets. Currently that rate is 15 percent.
There are exemptions to the capital gains tax, however, and one of the best-known exemptions is on home sales. In general, if you own your home and sell it for a profit, you are not taxed on the first $250,000 of profit if you are single, or on the first $500,000 of profit if you are a married couple. Neither McCain nor Obama have proposed changing this exemption.
The e-mail says that McCain supports capital gains taxes of "0 percent on home sales of up to $500,000 per home for couples." Technically, this is inaccurate, because the sales price on its own doesn't matter. It's the profit that matters (what you paid for the home minus what you're selling it for). Profits up to $500,000 per couple are exempt, no matter what the sales price.
The e-mail states "Obama will charge a 28 percent tax on all home sales." That's wrong. Obama intends to keep the same exemption for home sales as McCain. Most home sales under Obama's plan would also be taxed at 0 percent, unless, as we explained, profits on the home sale are more than $250,000 for a single person or $500,000 for couples.
We don't want to give the impression that there is no difference between the two candidates on capital gains tax, but the e-mail gets all the details wrong. The true difference is that McCain intends to leave the long-term capital gains tax at 15 percent, while Obama intends to raise it to about 25 percent for taxpayers reporting income of $250,000 or more per year.
But when it comes to home sales with the profits described above, McCain and Obama's policies are the same. The e-mail's statement that Obama will charge a 28 percent tax on all home sales is False.