HealthCare Reform and the New Taxes

With the recent Supreme Court ruling we now have a new tax. The penalty for not having any insurance coverage starting in 2014 is now called a tax, and therefore is ruled Consitutional. However, this post will give you information on all of the other taxes that were already in the Act.

Taxes on Individuals:

►The first tax is, of course, the mandate. Currently the tax is supposed to be $95 in 2014, $325 in 2015 and $695 in 2016. After 2016, the penalty will be adjusted for inflation. However, this will likely be increased prior to 2014 so don't hold your breath.

►The second tax is an additional 0.9 percent Medicare tax on earned income in excess of $200,000 ($250,000 for families).

►The third tax is wealthier Seniors are paying a higher Part D premium. This is not a tax per se but I'm including it because it is revenue going directly to the government.

►The fourth tax is the tax deduction for Part D retiree drug subsidy employers receive will be eliminated beginning in 2013.

►The fifth tax is if you have an adjusted gross income (AGI) over $200,000 ($250,000 for joint filers) you will also pay a 3.8 percent Medicare tax on unearned income, such as interest, dividends, rents, royalties and certain capital gains. Retirement plan distributions aren’t subject to this tax.

►The sixth tax is the threshold for deducting unreimbursed medical expenses, which will be increased from 7.5 percent of AGI to 10 percent of AGI in 2013. Most places do not list this as a tax, but if you can't deduct medical expenses from your taxes it is in effect a tax.

Taxes on Employers:

Some people do not consider taxes on an employer to have any affect on them. However, if the employer is paying a tax they are not paying you a higher salary.

►Employers with 50 or more full-time workers that don’t offer coverage will be charged $2,000 per full-time employee. However, the employer’s first 30 employees will be excluded from this assessment.

►Employers who do offer coverage could be subject to penalties, if any of their workers receives a premium tax credit. In this case, employers will be charged either $3,000 for each employee receiving the tax credit or $2,000 for each full-time employee, whichever is less. Again, the first 30 full-time employees will be excluded from this assessment. This means your employer will be penalized if you don't get on their insurance. What this will do to a couple who both work and both have coverage from their employer will remain to be seen.

►Employers with fewer than 50 full-time employees aren’t subject to these penalties.

Taxes on Business:

All taxes on a business is passed along to the consumer, so this will have an affect on you every time you buy from these business.

►10 percent tax on indoor UV tanning services went into effect in 2010.

►Manufacturers and importers of brand-name drugs began paying an annual fee in 2012, starting at $2.8 billion. This, along with the Part D subsidy, has resulted in an increase in medications.

►2.3 percent excise tax on medical devices goes into effect in 2013. This will increase health care costs.

►Health insurance companies will start paying an annual fee in 2014, starting at $8 billion. This will increase health insurance premiums.

►Insurers that offer high-premium plans will be subject to a 40 percent nonrefundable excise tax. This will result in fewer businesses offering the best plan available.

Tax Credits:

Since we are talking about taxes we must be fair and list the tax credits.

►In 2014, people with income between 133 percent and 400 percent of the federal poverty level will become eligible for tax credits or cost-sharing subsidies to help cover the cost of insurance. The amount of these credits will vary, depending on income. You can see how your income stacks up here. People with income 133% or less will automatically be placed on Medicaid.

►Businesses are eligible for a tax credit worth up to 35 percent of their share of their employees’ health premiums if they meet the following conditions:
→ They employ fewer than 25 full-time equivalent workers;
→ Their annual average wage is less than $50,000; and
→ They cover at least 50 percent of the cost of health insurance for an employee with single coverage.
This tax credit is only temporary and is due to be eliminated after 2 years.