Obamacare New Taxes 1/1/14

Obamacare New Taxes 1/1/14

Obamacare Taxes

  • 3% Tax on Medical Device Manufacturers 2014
  • 10% Tax on Indoor Tanning Services 2014
  • Blue Cross/Blue Shield Tax Hike
  • Excise Tax on Charitable Hospitals which fail to comply with the requirements of ObamaCare
  • Tax on Brand Name Drugs
  • Tax on Health Insurers
  • $500,000 Annual Executive Compensation Limit for Health Insurance Executives
  • Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D
  • Employer Mandate on business with over 50 full-time equivalent employees to provide health insurance to full-time employees. $2000 per employee $3000 if employee uses tax credits to buy insurance on the exchange (marketplace). (pushed back to 2015)
  • Medicare Tax on Investment Income 3.8% over $200k/$250k
  • Medicare Part A Tax increase of .9% over $200k/$250k
  • Employer Reporting of Insurance on W-2 (not a tax)
  • Corporate 1099-MISC Information Reporting (repealed)
  • Codification of the “economic substance doctrine” (not a tax)

ObamaCare Taxes That (may) Directly Affect the Average American

  • 40% Excise Tax “Cadillac” on high-end Premium Health Insurance Plans 2018
  • An annual $63 fee levied by ObamaCare on all plans (decreased each year until 2017 when pre-existing conditions are eliminated) to help pay for insurance companies covering the costs of high-risk pools.
  • Medicine Cabinet Tax
    Over the counter medicines no longer qualified as medical expenses for flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), health savings accounts (HSAs), and Archer Medical Saving accounts (MSAs).
  • Additional Tax on HSA/MSA Distributions
    Health savings account or an Archer medical savings account, penalties for spending money on non-qualified medical expenses. 10% to 20% in the case of a HSA and from 15% to 20% in the case of a MSA.
  • Flexible Spending Account Cap 2013
    Contributions to FSAs are reduced to $2,500 from $5,000.
  • Medical Deduction Threshold tax increase 2013
    Threshold to deduct medical expenses as an itemized deduction increases to 10% from 7.5%.
  • Individual Mandate (the tax for not purchasing insurance if you can afford it) 2014
    Starting in 2014, anyone not buying “qualifying” health insurance must pay an income tax surtax at a rate of 1% or $95 in 2014 to 2.5% in 2016 on profitable income above the tax threshold. The total penalty amount cannot exceed the national average of the annual premiums of a “bronze level” health insurance plan on ObamaCare exchanges.
  • Premium Tax Credits for Small Businesses 2014 (not a tax)
  • Advanced Premium Tax Credits for Individuals and Families 2014 (not a tax)
  • Medical Loss Ratio (MRL): Premium rebates (not a tax)

What Increases Do the ObamaCare Taxes Include for The $200k/$250k Earners?

ObamaCare Medicare Part A Payroll Tax

Starting in 2013, individuals with earnings above $200,000 and married couples making more than $250,000 will see an increase in the Medicare part A payroll tax. It’s an increase of 2.35%, up from the current 1.45% ( a .9% Medicare part A payroll tax hike), on adjusted income over the threshold.

ObamaCare Unearned Income Tax

This group will also pay a 3.8% unearned income (capital gains) tax on interest, dividends, annuities, royalties, rents, and gains on the sale of investments over the threshold.

Taxable income under the $200,000 for individuals and $250,000 threshold for families is subject to the same benefits and tax cuts as those who make under the threshold.

ObamaCare Employer / Employee Taxes

ObamaCare’s taxes mean large employers will have to provide health insurance to their employees and will see a raised Medicare part A tax, small businesses may be eligible for tax breaks.

Medicare part A Tax Hike for Employers and Employees

The Medicare part A tax is paid by both employees and employers who earn over a certain amount. ObamaCare’s Medicare tax hike is a .9% increase (from 2.9% to 3.8%) on the current total Medicare part A tax. This tax is split between the employer and employee meaning that they will both see a .45% raise.  Small businesses making under $250,000 are exempt from the tax. Employees making less than $200,000 as an individual or ($250,000) as a family are also exempt. Employers must withhold and report an additional 0.9 percent total on employee wages or compensation that exceed $200,000.

Tax Penalty for Not Providing Full-time Workers with Health Insurance the “Employer Mandate”

Employers with over 50 full-time equivalent employees must either insure their full-time employees or pay a penalty or “employer shared responsibility fee”. The penalty is $2000 per employee. If however, at least one full-time employee receives a premium tax credit because coverage is either unaffordable or does not cover 60 percent of total costs, the employer must pay the lesser of $3,000 for each of those employees receiving a credit or $750 for each of their full-time employees total.

Employers with under 25 full time employees, whose average income doesn’t exceed $50,000, can apply for tax credits of up to 50% for insuring their employees.

Tax Credits for Small Businesses

Small businesses with under 25 full-time equivalent employees with average annual wages of less than $50,000 can apply for tax breaks of up to 50% of their share of employee premium costs via Obamacare’s Small Business Health Options Program (accessible through your State’s Health Insurance Marketplace). The credit can be as much as 50% of employer premiums (35% for not-for-profits in 2014). The credit is only available if the employer is paying at least 50% of the total premiums.

Small Business Health Options Program

Employers with 50 or fewer employees, you can purchase affordable insurance through the Small Business Health Options Program (SHOP) even if they don’t qualify for tax credits.

Reporting

Along with the new law there are new requirements for reporting.

  • Effective for calendar year 2015, you must file an annual return reporting whether and what health insurance you offered your employees. This rule is optional for 2014. Learn more.
  • Effective for calendar year 2015, if you provide self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover. This rule is optional for 2014. Learn more.
  • Beginning Jan. 1, 2013, you must withhold and report an additional 0.9 percent on employee wages or compensation that exceed $200,000. Learn more.
  • You may be required to report the value of the health insurance coverage you provided to each employee on his or her Form W-2.

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