From our CPA office in St. Petersburg, FL – In July 2012, the Supreme Court voted to uphold the new health care legislation, commonly known as the “Affordable Care Act” (ACA) or “Health Care Act.” The new health care law has resulted in several changes to the US tax code. Listed below are some of the major changes effecting most individuals and businesses.
1. Beginning in 2014, US citizens and legal residents who do not qualify for Medicare or Medicaid must obtain minimum essential health care coverage for themselves and their dependents or pay a tax penalty. The tax penalty will vary based on income level and will be indexed for inflation in future years.
2. Also beginning in 2014, many taxpayers will be able to use a refundable tax credit to offset the cost of health insurance premiums. The credit is designed so that health insurance premium payments do not exceed a specific percentage of income. A sliding scale based on family size will be used to determine the amount of the credit.
3. In 2013, the limit for deductible medical expenses increases from 7.5 percent of adjusted gross income (AGI) to 10 percent of AGI. Currently, paid out of pocket medical expense amounts greater than 7.5 percent of AGI are deductible for taxpayers that itemize. The threshold will increase to 10 percent, thus reducing the amount of the benefit.
4. Starting in 2013, wages above $200,000 for individuals and $250,000 for married couples filing jointly will be taxed an additional 0.9 percent for Medicare taxes. Also starting in 2013, there will be a new Medicare tax of 3.8 percent on investment income for single taxpayers with income over $200,000 and for joint filers with income levels above $250,000. Investment income includes interest, dividends, rents, royalties, and gains on disposition of property.
5. Small businesses and tax-exempt organizations that employee 25 or fewer workers with average incomes of $50,000 or less, and pay at least half of the premiums for employee health insurance coverage are eligible for a tax credit. For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent for small tax-exempt organizations. Beginning in 2014, the credit percentage increases to 50 percent and 35 percent, respectively.
6. Effective in 2014, an additional tax will be levied on businesses with 50 or more full-time equivalent employees that do not offer minimum essential health coverage.
7. Effective July 1, 2010, a 10 percent excise tax will be charged on indoor tanning services. This tax does not apply to phototherapy services provided by licensed medical professionals.
Contact us to with any question regarding the new Health Care Act. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
