mortgageIt’s not unusual to see GoFundMe or other crowdfunding efforts for someone who, facing a catastrophic health crisis, can’t afford to pay their rent or mortgage. But until now, those incidents remained anecdotal.

But a study released this year by Emily A. Gallagher, Radhakrishnan Gopalan, and Michal Grinstein-Weis, professors and researchers at the University of Colorado-Boulder’s Leeds School of Business, Washington University’s Olin Business School and Washington University’s George Warren Brown School of Social Work (Grinstein-Wise is also the Associate Dean for Policy Initiatives at Washington University), respectively, reveals that data clearly indicates a relationship between having health insurance and being able to make your rent or mortgage payment.

But the data doesn’t just tell the story of people with catastrophic illnesses, but also the cascading issues that can occur from just being sick and missing work a few days, when an insured person might be able to see a doctor for more immediate relief.

“When people think of health insurance, they often think of its effect on health. They may even they go a step further and think about its effects on a person’s medical expenses and their medical debt,” the three explained in a synopsis of the study. “Our study says that health insurance has significant downstream benefits to a person’s finances that show up in their home payments.”

“These indirect benefits may not be so salient to health policymakers, but they are extremely important to the overall financial stability of the person,” they continued. “On top of this, they carry broader economic implications.” (more…)

We just said this at dinner last night: you can’t trust much of what you hear from politicians during normal times. But during an election year? Truth becomes as rare as finding a $150k home on Beverly Drive.

We’ve seen this in real estate this year. The Affordable Care Act (which I lovingly call “Obamacare”, like most physicians I know) has triggered vicious rhetoric from both Democrats and Republicans. Unfortunately, it’s generated a lot of misinformation, too. One example? The 3.8 percent sales tax on home sales that the healthcare legislation supposedly mandates. If I had a dollar for every time I heard this, I’d be able to buy an ocean-front vacation home with cash.

In fact, there is neither a real estate “sales tax” nor a real estate transfer tax included in any federal law. If you’ve read this online − where many myths get their start − treat it with the same respect you reserve for forwarded messages promising you a share of Bill Gates’ fortune or a free iPad®. The 2010 healthcare legislation did create a new 3.8 percent capital gains tax, but only a small percentage of U.S. residents will ever pay it.

I recently spoke with Marcus McCue, senior vice president at Guardian Mortgage Company, about the misconceptions surrounding this tax.

Candy: Let’s get this out there: Is there a new tax on residential property transactions in the Affordable Care Act?

Marcus: There is no 3.8 percent sales tax on residential property transactions. But there is a new 3.8 percent capital gains tax on all unearned profits from the sale of residential real estate that exceeds the existing tax exemptions.

Candy: So who will have to pay this new tax, and when does it take effect?

Marcus: The new tax will apply to the “unearned” income of high-income taxpayers. The new Medicare tax on unearned income will take effect Jan. 1 of 2013. Proceeds from this tax will shore up Medicare.

Candy: What exactly is “unearned” income according to the law?

Marcus: Unearned income consists of the dollars that people gain from investing their capital. This income includes capital gains, rents, dividends and interest income. It also comes from some investments in active businesses if the investor is not an active participant in the business. The portion of unearned income that is subject to both income tax and the new Medicare tax is the amount derived from these sources minus any expenses associated with earning that income.

Candy: So like stocks and bonds. Will the new legislation eliminate the $250,000/$500,000 exclusion on the sale of a principal residence?

Marcus: That’s the good news. That exclusion remains.

Candy: Whew!

Marcus: Homeowners will not be charged income tax on the profits they earn from the sale of a principal residence as long as those gains are less than $250,000 for an individual or $500,000 for married couples filing their tax returns jointly. The new 3.8 percent capital gains tax will not apply to such gains.

Candy: Will the 3.8 percent tax apply to any part of the income gains that homeowners earn when they sell their principal residence?

Marcus: Possibly. But it is uncommon these days to find married couples making more than $250,000 a year who then also made more than $500,000 in profits when they sold their home.

The new tax applies only to home-sale gains of more than $250,000 for single filers or $500,000 for joint filers. And these gains are only taxed on individuals earning an adjusted gross income of more than $200,000 and on married couples with an adjusted gross income of more than $250,000.

Candy: What happens with a second or vacation home?

Marcus: The $250,000 or $500,000 tax-free exemption does not apply to the sale of a second home − and certainly does not apply to the sale of an investment property − unless the sellers decide to occupy those properties as their primary residences at least two years before they sell them – basically turning them into a primary residence.

A few years ago, though, Congress cracked down on this break for taxpayers who convert their second homes to principal residences. A portion of the gain on the subsequent sale of the home is ineligible for the home-sale exclusion of up to $500,000 even if the seller meets the two-year ownership and use tests. The portion of the profit that’s subject to tax is based on the ratio of the time after 2008 when a house served as a second home or a rental unit to the total time the sellers owned it.

Candy: I have to say, that sounds really confusing.

Marcus: It is. We are not tax advisors. We strongly recommend that homeowners consult an expert if they have specific questions regarding their situation, especially if they plan to convert a home to a primary residence and then sell it.

Candy: Are there examples online where REALTORS and homeowners can learn more about these tax issues?

Marcus: There are several places. has several examples, while Rob Chrisman’s industry blog gives a solid explanation. Page 946 of the Compilation of Patient Protection and Affordable Care Act gives an explanation that while not exactly clear is accurate. There’s also a FAQ on the Web site of the National Association of Realtors.

If you have additional questions about mortgage regulations, lending or the new capital gains tax, feel free to contact Marcus McCue at 972-200-3380, or on Facebook.