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Tax Talk in Healthcare

Tax Measures to Know in the Affordable Care Act

Published September 10, 2012 12:11 PM by MIKE MANOLOFF

The Supreme Court recently upheld the Affordable Care Act, and all the tax measures were kept in place. What are some of the highlights as a result of this ruling?

Starting in 2014, almost all Americans must maintain a minimum amount of health insurance coverage. Failure to do so will result in at tax that will be reported on your 1040 tax return. The calculations are complex and will not be identical in the years 2015 and 2016.

There is also a premium assistance tax credit for eligible lower income individuals who obtain coverage under a qualified health plan through an insurance exchange. These rules are also will require some rather unusual calculations.

The medical deduction threshold will increase starting after 2012. The current unreimbursed medical deduction allowance is 7.50 percent of adjusted gross income. That figure will increase to 10percent, with some exceptions for those over age 65, until the year 2016.

There will be an additional medicare tax imposed starting after 2012. This will be .9 percent on wages and self employment income to those with income more than $200,000 or married couples in excess of $250,000 per year  ($125,000 if couples file separate returns).

There also will be a medicare tax on investment income of 3.80 percent on income  more than $200,000 or $250,000 for married couples.  Investment income includes for example, interest income, dividends, annuities, royalties and rents (unless such income is derived in the ordinary course of a trade or business). The regulations on this have yet to be issued the IRS.

An interesting note, if you sell your home, you could trigger this additional 3.8 percent tax as well.

After 2012, there will be a medical device excise tax on sales that will be 2.3 percent of the sales price. This will require a separate tax filing to the IRS to report these transactions. There will be a retail exemption. A bill that would repeal the 2.3 percent tax has been proposed, but  it has yet been voted on by the Senate.

Other changes starting in 2013 (assuming no changes by congress) include a capital gains tax rate  increase to 23.8 percent, up from the current 15 percent. And dividends tax will go from 15 percent to 43.4 percent.

And one very puzzling rule is the "economic substance doctrine," which  permits the IRS to disallow completely legal tax deductions and other tax minimizing plans just because the IRS deems that it lacks substance and is merely intended to reduce taxes owed.


Very interesting article, I am very interested in learning about how the new healthcare reform is going to affect healthcare in the U.S With the medical reimbursement threshold being raised does this mean that patients will have to spend more money out of pocket? Also how will Medicaid patients be affected? Will there be less people qualifying for Medicaid after this law is in effect?

Amanda , HIT - Student, Davenport September 24, 2012 4:29 PM
Sterling Heights MI

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