Happy Holidays! 2014 is almost over, but updates keep on coming. Last week we had some awesome news and information. This week we’ve some useful information that Delerme CPA can help you with.
The Affordable Care Act (ACA) has brought monumental change to the U.S. healthcare system, and its impact on taxpayers and accountants continues to be no small matter either. Here we offer the following tips and advice about the law and its requirements, as we head into tax season.
- We have a rise in the medical expense deduction threshold from 7.5% of adjusted gross income(AGI) to a now a 10%. This does not apply to the taxpayer or their spouse if they are 65+ years of age, but after 2016 that waiver will change. Medical expenses are deductible only if cost exceeds 10% of AGI.
- The employee portion of the Medicare tax on wages is increased by .9% on wages in excess of $250k/$125k/$200k for married people filing jointly/filing seperately/ or single people. There’s a FICA Tax that comprises a Social security tax equal to 6.2% of wages up to the taxable wage base and a Medicare tax equal to 1.45 percent of all wages. Both employer and employee are subject to this FICA tax. Under the ACA, Medicare tax is increased an additional .9% on wages in excess of the amounts noted above, this addition .9% is levied when an individual’s wages pass the $200k mark. The taxpayer is not liable for the additional .9% tax because of a combined income with their spouse is less than $250k.
- Taxpayers with a modified AGI of more than $250k/$125k/$200k, as noted before, are subject to a 3.8% medicare contribution tax.
- The excise tax for non-qualified payouts from a health savings account rose from 10% to 20%
- Those who receive advance credits when buying insurance from an exchange must file a tax return to reconcile income and advance credits.
- Insurance companies distinguish ACA coverage by ranking them according to their actuarial value, or the percentage the carrier will pay before the insured gets involved. There are four coverage tiers: platinum, gold, silver, and bronze– in that order with platinum being the highest and bronze being the lowest. Someone covered by a platinum plan will have lower out of pocket costs that someone covered under a bronze plan, but the monthly premium for a platinum is much higher.
- Self-employed taxpayers able to deduct health insurance premiums are best served by enrolling in the premium metal plans.
And just in case your client says the heck with ACA requirements and you decide to skip insurance, say the penalty for being uninsured in 2015 is the greater of $325 per person or 2 percent of household income. The maximum penalty for a family is $975. Of course, in light of the recent election, many are anticipating changes in the ACA in the coming year.
If you have questions or concerns will always be here to try and answer any question you have. Happy Friday and Merry Christmas.