Now that the Supreme Court has ruled largely upholding the Affordable Care Act, taxpayers should be aware of some tax provisions that may impact them and prepare accordingly. The following provisions become effective in 2013:
- Taxpayers with modified AGI over $200,000 ($250,000 if MFJ; $125,000 if MFS) will be subject to a 3.8% surtax on net investment income,
- The hospital insurance portion of the FICA tax will be increased from 1.45% to 2.35% for wages over $200,000 ($250,000 if MFJ; $125,000 if MFS),
- Medical expenses will be deductible as itemized deductions only to the extent they exceed 10% of AGI (7.5% threshold will still apply to taxpayers who turn 65 before the end of the tax year),
- Employer-provided health Flexible Spending Arrangements (FSAs) will be limited to $2,500 per year.
- Employers who provide qualified prescription drug coverage for Medicare Part D eligible retirees, which is subsidized by the Department of Health and Human Services, will have to reduce their deduction for the coverage by the amount of the excludable subsidy.
In addition to the above, the Supreme Court also upheld the “individual mandate” which requires most U.S. citizens and legal residents to maintain “minimum essential health coverage” for tax years beginning after December 31, 2013. The mandate states that uninsured individuals will face a penalty if the “minimum essential health coverage” is not maintained. The penalty will reach its maximum in 2016 and will be the greater of:
- 2.5% of household income in excess of a taxpayer’s household income for the taxable year over the threshold amount of income required to file an income tax return under IRC Section 6012(a)(1) or,
- $695 per uninsured adult in the taxpayer’s household and $347.50 per child, maxing out at $2,085 for a family
For any assistance in determining the potential monetary impact on you, please contact any of our Construction Industry Group service providers.