Obamacare Taxes 2014
Obamacare taxes will forever change the way you get healthcare. In 2014, most low and middle income Americas who buy health insurance on the new state and federal exchanges will be eligible to receive federal subsidy to defray the cost of their policy premiums. Anyone making up to 400% of the poverty line qualifies for a subsidy. In 2014, that means any individual making up to $45,960 or a family of four with household income up to $94,200 is eligible. In general, the less you make the larger your subsidy will be.
What if I am in a high income household?
Chances are you probably won’t qualify for the government subsidy. Also, the law raised the Medicare tax on wages and subject investment income to a Medicare tax for the first time. So you will owe 0.9% on your earned income over $200,000 ($250,000 if married). Remember, this is on top of the 1.45% Medicare tax that you currently pay on all your wages. If you, have a high income and you have investment income, you may also be subject to a 3.8% tax on at least a portion of your capital gains and dividends.
Other tax considerations
- There is a new threshold for the deduction of medical expenses. Instead of being able to deduct 7.5% of your adjusted gross income (AGI) you can only deduct medical expenses that exceed 10% of your AGI.
- Any distributions from your Health Savings Account and spent on something other than qualified medical expenses are now subject to a 20% tax up from 10%. This is in addition to any ordinary income tax due as a result of adding that distribution back to one’s gross income
- The amount you can contribute to your flexible spending account has also been reduced to $2,500 from $5,000. It will be adjusted for inflation going forward.
- Starting in 2018 there will be a new 40% excise tax on taxpayers who are covered by high cost health insurance plans (with premiums at or above $10,200 for a single or $27,500 for a family). Insurers or employers who are self-insured will pay the tax, but it is expected to trickle down to mean higher costs for consumers.
Will the Obamacare taxes be repealed?
Though it is possible that the law could be repealed you need to ask yourself if you want to plan your financial affairs around this possibility. The Supreme Court has already said that the healthcare law is constitutional. If you choose not to get health insurance and the law is not repealed then be prepared to pay the penalties.