Supreme Court Upholds Health Care Mandate
How will this impact your tax liability?
Update by Kevin Hines , CPA, MST, CVA, CSEP
In a historic decision, the Supreme Court recently upheld a critical piece of the Affordable Care Act, the individual mandate to acquire health insurance after 2013. The ruling went on to say that the federal government does have the power to require all Americans to acquire insurance if the “fine” imposed on anyone not having insurance is not considered a tax.
Some of the anticipated changes to individual taxes are:
- Higher Medicare Taxes on High-income taxpayers. Single people with earned income (wages and self-employed) more than $200,000 and married couples with earned income more than $250,000 will be taxed at an additional 0.9% Medicare tax (total of 2.35% of Medicare tax) on the excess over those base amounts.
- Medicare payroll tax extended to investments – A new 3.8% tax will be imposed on net investment income of all single taxpayers with adjusted gross income (AGI) above $200,000 and all joint filers with AGI over $250,000. Net investment income is interest, dividends, royalties, rents, gross income from passive activities, net gain from disposition of property (other than property held in a trade or business). Retirement income will not be considered investment income.
- Floor on medical expenses deduction raised from 7.5% to 10% – Under current law, individuals can take an itemized deduction for unreimbursed medical expenses for regular tax purposes if those expenses exceed 7.5% of AGI. The new law changes this threshold to 10%.
These are some of the expected changes, in addition to the rollback of capital gains and dividend tax rates to Pre-Bush tax cuts rates that are expected for the 2013 calendar year. Please stay connected to our website for future updates.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.
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