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Affordable Care Act Tax: Individual Tax Changes

Affordable Care Act Tax: Individual Tax Changes in Colorado

The tax landscape is going to change for all Americans beginning in 2014. Starting January 1, 2014, individuals, families and businesses will be affected by the new Affordable Care Act. As a new set of rules takes place, KKB is here to answer any questions you may have regarding changes to your individual taxes. Below is a summary of the outlined tax changes that may affect your individual tax status. You can read the full document, which details the tax changes affecting individuals and families from the government here.

Individual mandate – This mandates that everyone will be required to have health insurance or pay a penalty, either through a job, Medicare, Medicaid, CHIP, Veterans Affairs, the Indian Health Service, or Tricare. Those without health coverage will pay a tax penalty based on household income.

Higher Medicare payroll tax on wages – Under the provisions of the new law, which took effect in 2013, single individuals earning more than $200,000 and married couples earning more than $250,000 will be taxed at a higher rate for Medicare. Since companies won’t be responsible for determining whether a worker falls into this category, it’s up to the employee to remit additional Medicare taxes when they file income tax returns.

Medicare payroll tax extended to investments – Starting in 2013, a Medicare tax will be applied to investment income. A new 3.8% tax will be imposed on net investment income of single tax payers with adjusted gross income above $200,000 and joint filers with adjusted gross income of $250,000. This tax on investments does not include tax-deferred retirement accounts such as 401 (k) plans.

Additional tax changes affecting individuals:

  • Floor on medical expense deduction raised from 7.5% to 10%
  • Limit on reimbursements of over-the-counter medications from HRAs, HSAs, FSAs, and MSAs
  • Increased penalties on nonqualified distributions from HSAs and Archer MSAs
  • Health flexible spending arrangements (FSAs) are limited to $2,500
  • Dependent coverage in employer heal plans for any child of an individual that has not attained age 27
  • A 10% tax on indoor tanning services

We suggest that you read the entire document on these tax changes. And please contact us, your Colorado CPAs for all your tax services.

How to use this Information:
Our Colorado CPAs at KKB will help you navigate the individual changes of the new health care reform. You have a whole life to plan; let us do the financial and tax planning. We’ll take care of all the particulars of the new health care reform.

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