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.
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: