What's in Store... Maybe | Dissecting the Healthcare Bill - Part 4 of 4 | Tax Tip of the Week | No. 49

This week we will look at provisions of the Healthcare Bill that take effect in 2013 – 2018.

Looking this far ahead is unpredictable.  Who knows how many changes may take place within Congress and the Federal Administration during this time period--or how the winds of politics may shift.  However, these highlights give us a roadmap of what to expect:

2013

• Maximum health Flexible Spending Account (FSA) contributions capped at $2,500/year and increased annually by inflation.
• Increases Medicare Part A payroll tax rate by 0.9% on earnings over $200,000 for individuals and $250,000 for married filing joint returns.  Note: this increase is only on the employee share of Medicare and not the employer’s share.
• Self-Employed individuals and couples will also pay an additional 0.9% Medicare care tax with incomes above these levels.
• An added Medicare tax (3.8% total) will be assessed on the investment income of individuals and couples meeting the above-stated thresholds.   This means there will be an additional tax on all interest, dividend and capital gains income.
• The ability to deduct medical expenses on your Schedule A personal tax return will increase from the current “floor” of 7.5% of AGI to a 10% “floor”.  Note:  taxpayers over 65 will keep the 7.5% level until 2016.

2014

• Employer and individual mandate to buy health insurance begins.  Both self-employed and W-2 employees must buy individual polices if their employer does not provide coverage.
• For low-income individuals, a premium assistance credit becomes available.
• Businesses with 50 or more employees must provide health coverage or pay a $2,000 penalty per employee.
• Penalties will also be assessed against individuals who do not buy health coverage.
• Various “Voucher Programs” will be introduced to help pay for health coverage.

2017 – 2018

• A 40% excise tax will be assessed to employers offering “Cadillac Insurance Plans”.  Currently, this is defined as plans where the cost of health coverage for individuals exceeds $10,200 or exceeds $27,500 for family plans.
• States may allow large groups (greater than 100 employees) to purchase coverage through Exchanges.

What Do You Think?
Looks like we're in for a long ride with the Healthcare Bill! We'll continue to cover changes in the Tax Tip of the Week, but let's talk about it. Post your comments here. What do you think about the Healthcare Bill? What are your concerns and comments? Join in the conversation!

As always, you can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our web site.

Rick Prewitt - the guy behind TTW

...until next week.