Dear Ray,

I was planning to sell my home in

2013 and downsize, but I just learned that there is a new 3.8-percent tax on real estate sales that goes into effect next year.

Does this apply to all real estate sales? Should I try to sell my home in 2012 to avoid the new tax? — S. P.

There is an e-mail that’s been circulating on the Internet about a new “Obamacare” 3.8-percent tax on home sales. The e-mail is intended to frighten people, particularly older folks who are considering downsizing. The e-mail is a mixture of fact and fiction, but mostly fiction.

The Affordable Care Act, aka “Obamacare,” imposes a new 3.8-percent tax on investment income for the wealthy. It only applies to couples who make more than $250,000 or individuals who make more than $200,000. Investment income could include the profits from real estate sales. However, it would only be applicable to those with higher incomes who make up less than 5 percent of all taxpayers.

Starting on Jan. 1, 2013, the tax rates on long-term capital gains and dividends for higher-income earners will jump from the current historic low of 15 percent to 18.8 percent, assuming Congress extends the current law. (If, on the other hand, Congress allows the tax rates set in 2001 and 2003 to expire on Dec. 31 — an unlikely scenario, according to many experts — the top rate on capital gains will rise to 23.8 percent, and the top rate on dividends will nearly triple, to 43.4 percent.)

The government currently imposes taxes on investment income in various ways, and it could have simply raised current taxes, rather than creating a new tax. Lawmakers wanted to link the new tax revenues to health care, so the money will go to the Medicare trust fund to pay for health care. This is the first time investment income will be subject to Medicare taxes.

Let me be clear: The new tax does not specifically apply to all real estate transactions, but rather to investments. The chances are, this tax will not apply to you, unless you are wealthy or sell your home for a substantial profit.

Let’s assume you’re retired, and thinking of selling your home and downsizing? Most or all of the equity in your home is already tax-free because

of a longstanding tax exemption on the profits from home sales. Individuals are not taxed on the first $250,000 of profit, and couples enjoy a $500,000 exemption on the profit from the sale of their home. (That’s profit, or the equity in your home, not the sale price.)

If you are wealthy and/or you sell your home at a substantial profit, you may be obligated to pay the new 3.8-percent tax on any income over the limit of the exemptions to which you are entitled.

But most Americans won’t need to worry about the tax. To be hit with the new tax, you would need to clear more than $250,000 profit, which means $250,000 more than you paid for the home.

. ASK RAY, Page 30