Changes coming in 2013 under the Affordable Care Act
We have all heard by now that the Supreme Court has upheld the Affordable Care Act. Many of the provisions have already been enacted while it will be several years before others take effect. We have highlighted some of the important provisions that will come into effect in 2013 below. If you have any questions or concerns about how these changes may impact you please call your LMGW advisor.
- Additional .9% Medicare tax on higher earners-An additional .9% Medicare tax will be charged on taxpayers with salary and/or self employed earnings above $200,000 for single taxpayers, $250,000 for married filing joint taxpayers and $125,000 for married filing separate taxpayers. The .9% tax is calculated on a taxpayer’s salary and/or self employed earnings in excess of the applicable threshold. This tax is also in addition to the 3.8% Medicare tax on investment income discussed below. Taxpayers should be aware that they could be subject to both taxes and will need to take them into consideration in calculating estimated tax payments in the future. For more information see our previously posted article here.
- Additional 3.8% Medicare tax on net investment income-Taxpayers with modified adjusted gross income (MAGI) above $200,000 for single taxpayers, $250,000 for married filing joint taxpayers and $125,000 for married filing separate taxpayers will be subject to an additional 3.8% Medicare tax on their net investment income. Investment income generally includes interest, dividends, capital gains and losses on investment property and rental income. The tax will be imposed on the lesser of your net investment income or MAGI in excess of the threshold. If your MAGI is below the applicable threshold the additional tax will not apply, even if you do have investment income. For more information see our previously posted article here.
- Higher threshold for itemized medical expenses-Under current law, medical expenses can be deducted as an itemized deduction to the extent they exceed 7.5% of AGI. In 2013 the threshold will increase to 10% of AGI for regular tax purposes. The threshold will remain at 10% for AMT purposes. If you or your spouse is 65 or older at the end of 2013 the lower 7.5% threshold will apply until 2017.
- $2,500 cap on FSA contributions-The maximum an employee can contribute to an FSA plan will be capped at $2,500 annually beginning in 2013.
- 2.3% Excise tax for medical device manufacturers and importers-Medical device manufacturers and importers will have to pay a 2.3% excise tax on taxable sales of medical devices. Devices retailed to the general public are exempt, as are hearing aids, eyeglasses and contact lenses.
- Deduction for employer Part D is eliminated- The deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees will be eliminated starting January 1, 2013.