Regardless of whether taxes are raised on the top 2% of earners as part of a deal to avoid the fiscal cliff, taxes will be going up on the wealthy as the Affordable Healthcare Act kicks in.
The new taxes consist of an increase in the payroll tax and a tax on investment income including dividends, interest, and capital gains.
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Wealthy people are more likely to already have health insurance and will be called upon to help pay for coverage for lower-income families.
The most affluent will see their taxes increase as much as $6000 per year. A hospital tax on employees and employers to help pay for Medicare is currently levied on all wages at 1.45%.
Starting in January, an additional .9% will be levied on individuals making more than $200,000 per year and couples making over $250,000.
Medicare taxes have previously only applied to individual income. This will be the first tax that applies to the combined salaries of married couples.
The taxes are required to be withheld from employee paychecks but employers may not know how much an employee’s spouse earns and may not withhold enough to cover the full liability.
If employees expect to owe additional tax, the IRS says they should make estimated payments starting in April 2013 or ask their employers to withhold more.
About 85% of the tax will be levied on the top 1% of taxpayers while the biggest potential beneficiaries will likely be people of modest income who receive Medicaid or federal subsidies to buy insurance.
Currently, expenses that exceed 7.5% of a taxpayer’s income can be deductible. Next year, that percentage will be raised to 10%.
There will also be a $2500 limit on contributions to health savings accounts. This along with the increase in medical expense deduction requirements is expected to raise over $40 billion in revenues.