Campbell Discusses Four New Health-Related Taxes
By: Mark Gruba
Updated: January 14, 2013
Effective January 1, 2013 there are four new taxes on individuals and families as a result of the 2010 Affordable Care Act.
CPA Keith Campbell of Campbell CPA Consulting discusses the new taxes on New 8 at Sunrise Monday morning.
Two of the taxes impact high income individuals - hospital insurance and medicare taxes on investment income. The employee portion of the hospital insurance tax part of FICA, normally 1.45 percent of covered wages, is increased by .09 percent to 2.35 percent on wages that exceed a threshold amount. In the case of a joint return or surviving spouse, the threshold amount is $250,000. For a married individual filing a separate return the threshold is $125,000, and $200,000 in any other case.
Based upon the same thresholds as the hospital insurance tax, a second tax increase is now imposted on individuals equal to 3.8 percent of that individual's net investment income for the year. A similar rule applies to estates and trusts as well. Investment income includes interest, dividends, annuitites, royalties and rents, as well as net gain from the disposition of property, other than ordinary trade or business income that is not passive.
The two other new taxes impact people of all incomes, and they include the threshold for medical care itemized deductions and the health care flexible spending arrangement. The threshold for the itemized deduction for unreimbursed medical expenses has increased from 7.5 percent of adjusted gross income to 10 percent of AGI for regular income tax purposes. This effects everyone, except in the years 2013 to 2016 if either the taxpayer or taxpayer's spouse has turned 65 before the end of the tax year. For those people the threshold will remain at 7.5 percent.
Effective for cafeteria plan years beginning after December 31, 2012, the maximum amount of salary reduction contributions an employee may have made to a flexible spending arrangement for any plan year is $2,500 as opposed to the previous $5,000 maximum.
Campbell recommends these new taxes be considered by people for financial and tax planning purposes, especially when it comes to payroll withholding and estimated tax payments.
For more information about this story or other health tax related issues, click here.
CPA Keith Campbell of Campbell CPA Consulting discusses the new taxes on New 8 at Sunrise Monday morning.
Two of the taxes impact high income individuals - hospital insurance and medicare taxes on investment income. The employee portion of the hospital insurance tax part of FICA, normally 1.45 percent of covered wages, is increased by .09 percent to 2.35 percent on wages that exceed a threshold amount. In the case of a joint return or surviving spouse, the threshold amount is $250,000. For a married individual filing a separate return the threshold is $125,000, and $200,000 in any other case.
Based upon the same thresholds as the hospital insurance tax, a second tax increase is now imposted on individuals equal to 3.8 percent of that individual's net investment income for the year. A similar rule applies to estates and trusts as well. Investment income includes interest, dividends, annuitites, royalties and rents, as well as net gain from the disposition of property, other than ordinary trade or business income that is not passive.
The two other new taxes impact people of all incomes, and they include the threshold for medical care itemized deductions and the health care flexible spending arrangement. The threshold for the itemized deduction for unreimbursed medical expenses has increased from 7.5 percent of adjusted gross income to 10 percent of AGI for regular income tax purposes. This effects everyone, except in the years 2013 to 2016 if either the taxpayer or taxpayer's spouse has turned 65 before the end of the tax year. For those people the threshold will remain at 7.5 percent.
Effective for cafeteria plan years beginning after December 31, 2012, the maximum amount of salary reduction contributions an employee may have made to a flexible spending arrangement for any plan year is $2,500 as opposed to the previous $5,000 maximum.
Campbell recommends these new taxes be considered by people for financial and tax planning purposes, especially when it comes to payroll withholding and estimated tax payments.
For more information about this story or other health tax related issues, click here.
