INDIVIDUALS
Individual Mandate
Starting in 2014, US citizens and legal residents not qualified for Medicare or Medicaid must obtain minimum essential health care coverage for themselves and their dependents or pay a tax penalty that varies based on income level. In 2014, the basic penalty for an individual (no dependents) is $95, with substantial increases in subsequent years--$325 in 2015 and $695 in 2016, indexed for inflation thereafter.
Starting in 2014, US citizens and legal residents not qualified for Medicare or Medicaid must obtain minimum essential health care coverage for themselves and their dependents or pay a tax penalty that varies based on income level. In 2014, the basic penalty for an individual (no dependents) is $95, with substantial increases in subsequent years--$325 in 2015 and $695 in 2016, indexed for inflation thereafter.
Refundable Tax Credit
Effective in 2014, certain taxpayers will be able to use a refundable tax credit to offset the cost of health insurance premiums so that their insurance premium payments do not exceed a specific percentage of their income. Qualified individuals are those with with incomes between 133 percent and 400 percent of the federal poverty level. A sliding scale based on family size will be used to determine the amount of the credit. In addition, married taxpayers must file joint returns to qualify.
Effective in 2014, certain taxpayers will be able to use a refundable tax credit to offset the cost of health insurance premiums so that their insurance premium payments do not exceed a specific percentage of their income. Qualified individuals are those with with incomes between 133 percent and 400 percent of the federal poverty level. A sliding scale based on family size will be used to determine the amount of the credit. In addition, married taxpayers must file joint returns to qualify.
FSA Contributions
FSA (Flexible Spending Arrangements) contributions are limited to $2,500 per year starting in 2013 and indexed for inflation after that.
FSA (Flexible Spending Arrangements) contributions are limited to $2,500 per year starting in 2013 and indexed for inflation after that.
New Rules for HSAs and Archer MSAs
Tax on non-qualified distributions from HSAs and Archer MSAs that are used to cover the cost of over the counter medicine without a script will increase to 20 percent starting in 2011. Medical devices, eyeglasses, contact lenses, copays, and deductibles are not affected, nor is Insulin even if it is non-prescription.
Tax on non-qualified distributions from HSAs and Archer MSAs that are used to cover the cost of over the counter medicine without a script will increase to 20 percent starting in 2011. Medical devices, eyeglasses, contact lenses, copays, and deductibles are not affected, nor is Insulin even if it is non-prescription.
Medicare Part D
Medicare Part D, the tax deduction for employer provided retirement prescription drug coverage, will be eliminated in 2013.
Medicare Part D, the tax deduction for employer provided retirement prescription drug coverage, will be eliminated in 2013.
Increase in AGI Limit for Deductible Medical
Expenses
The deduction is currently 7.5 percent of AGI, but next year, in 2013, that increases to 10 percent of AGI. The 7.5 percent threshold continues through 2016 for taxpayers aged 65 and older, including those turning 65 by December 31, 2016.
The deduction is currently 7.5 percent of AGI, but next year, in 2013, that increases to 10 percent of AGI. The 7.5 percent threshold continues through 2016 for taxpayers aged 65 and older, including those turning 65 by December 31, 2016.
Health Coverage of Older Children
The cost of employer provided health care coverage for children (through age 26) claimed as dependents on tax returns is excluded from gross income.
The cost of employer provided health care coverage for children (through age 26) claimed as dependents on tax returns is excluded from gross income.
Medicare Tax Increases for High Income
Earners
Starting in 2013, there will be an additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly).
Starting in 2013, there will be an additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly).
Also starting in 2013, there is a new
Medicare tax of 3.8 percent on investment (unearned) income for single
taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,00
joint filers). Investment income includes dividends, interest, rents,
royalties, gains from the disposition of property, and certain passive activity
income. Estates, trusts and self-employed individuals are all liable for the
new tax.
Exemptions are available
for business owners and income from certain retirement accounts, such as
pensions, IRAs, 401(a), 403(b), and 457(b) plans, is exempt.
If you need assistance
navigating the complexities of the new health care act, don't hesitate to call
us. We're here to help.
Amare Berhie, Tax
Advisor
612-282-3200
866-936-0430 Toll Free
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