The Obamacare Tax (Affordable Care Act Tax) will affect your 2014 tax plans. If you are seeking healthcare coverage through the Health Insurance Marketplace open enrollment runs from Oct. 1, 2013, through March 31, 2014. If not, you may still be affected because of the changes to the itemized deduction rules for medical expenses.
Health Insurance Premium Tax Credit
Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. Tax planning can help you determine if you qualify for the tax credit and how best to use the tax credit. If you do not qualify, and you own a small business you may be able to obtain coverage through your business. You small business could qualify for a 50% healthcare tax credit.
Employer Provided Healthcare
The Obamacare tax requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.
The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee’s income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits.
Your tax advisor can help you fulfill your reporting requirements. The healthcare tax credit is a valuable one that should be explored to minimize your tax liability. Remember, that employees consider employer provided health insurance to be important in making a decision to work for an employer. Employee turnover may be reduced by providing this valuable benefit.
Changes to Itemized Deduction for Medical Expenses
Beginning Jan. 1, 2013, you can claim deductions for medical expenses not covered by your health insurance when they reach 10 percent of your adjusted gross income. This change affects your 2013 tax return that you will file in 2014. There is a temporary exemption from Jan. 1, 2013, to Dec. 31, 2016, for individuals age 65 and older and their spouses.
If you are seeking information about how to obtain health care coverage or financial assistance to purchase health care coverage for you and your family, visit the Health and Human Services website, HealthCare.gov.