How will the Supreme Court decision upholding the health care bill affect your clients? Here are the nine key tax rules that financial advisors need to know about.
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1. Beginning in January 2013, an additional Medicare tax payroll tax of 0.9% will be applied to individuals with adjusted gross income (AGI) exceeding $200,000 and married couples filing jointly with more than $250,000 of AGI.
2. Beginning in January 2013, a 3.8% “surtax” will be levied on single taxpayers with AGI exceeding $200,000, and married couples filing jointly with AGI exceeding $250,000. The surtax applies to the lesser of net investment income or AGI exceeding $200,000 for individuals ($250,000 for married couples filing jointly).
3. The penalty on those who do not have health insurance is scheduled to take effect January 1, 2014. The annual penalty will be $95 or 1% of income, whichever is greater. It rises to $695 or 2.5% of income for individuals by 2016. Families face a maximum penalty of $2,085, but still will owe 2.5% of household income if that amount is greater.
4. In 2012, all W-2s will have to include the value of health care benefits provided to employees.
5. Effective in 2011, the penalty on non-qualified distributions from Health Savings Accounts is doubled to 20%.
6. In 2013, the itemized deduction floor for medical expenses increases to 10% of AGI.
7. Beginning in 2018, the “Cadillac Tax” will become effective — a 40% excise tax on the portion of high-cost health insurance plans that exceed $10,200 for individuals or $27,500 for families.
8. Beginning in 2014, a refundable tax credit will be available to help individuals with low income purchase health insurance coverage.
9. Beginning in 2014, a non-deductible fee of $2,000 per employee will be imposed on businesses that do not provide adequate coverage. The first 50 employees are not counted.
For a detailed discussion of the tax rules affecting clients in the Affordable Health Care Act, please join us for a free webinar on Friday, July 6 at 4 ET, when I will discuss:
- Medicare payroll tax of 0.9% on joint filers with more than $250,000 of AGI
- 3.8% surtax on joint filers with more than $250,000 of AGI
- New reporting requirements on W-2s
- Doubling of the penalty on non-qualified distributions from Health Savings Accounts
- 40% excise tax on high-cost health insurance plans