Now that the Health Reform Law has been upheld, a series of tax increases are ready to take effect. Several reform related tax increases are going into effect in 2013.
Upper income earners will pay more in Medicare taxes. A 0.9% surtax goes into effect on single taxpayers who make over $200,000 a year, and couples making over $250,000 a year. This applies only to the employees share, but it also applies to self employment tax.
Additionally, unearned income will be subject to a 3.8% Medicare surtax.
In addition, the law used to provide that there was a floor of 7.5% of adjusted gross income for deducting medical expenses. This will now jump to 10% for anyone under 65 years old. If you are over 65 years old, then the law does not go into effect until 2017. Also, the amount you can spend on a health flexible spending account is now capped at $2,500 a year.
Starting in 2014, individuals who are uninsured will owe a penalty tax equal to the larger of $95.00 or 1% of income above the filing threshold. This is the income level that triggers the requirement to file tax returns. For families, the penalty will be capped at $285.00. The charge then increases dramatically over the next two years. In 2016, the top fine will be $2,085.00.
Firms with 50 or more full-time employees but no health plan will owe an excise tax. The tax is $2,000 multiplied by the number of employees with a 30 employee offset. This penalty or tax as the Supreme Court calls it also goes into effect even if the employer offers health insurance if it is determined that the coverage is substandard or is too costly for employees.
The bottom-line is that the IRS’s role in health reform is only going to get larger.