EVANS, GEORGIA--(Marketwired - Oct. 7, 2013) - Whether you're filing taxes online or by mail, you may be affected by the new tax provisions set out in the Affordable Care Act. Read on about the changes that are set to begin in 2014.
Will my taxes be affected by the health care reform?
The new health care law does include some income tax filing changes but whether or not they affect you will depend on your particular circumstances. In 2013, joint filers with incomes over $250,000 and single filers with incomes over $200,000 will be subject to two taxes:
- Medicare tax on earned income: The tax will increase from 1.45% to 2.35% but only on income beyond the $200,000/$250,000 thresholds.
- Medicare tax on investment income: A 3.8% tax will be assessed on interest, dividends, capital gains, rent and royalty income, along with annuities from non-qualified plans. Investment income from retirement accounts is not subject to the tax.
Taxpayers at any income level could be subject to these changes:
- Cap on flexible spending account (FSA) contributions: In 2013, a cap of $2,500 goes into effect. Any account holdings above the cap become part of your taxable income. The cap will rise each year as the cost of living increases.
- New limits on medical deductions: In 2013, expenses used to deduct out of pocket medical expenses will rise from 7.5% to 10% for filers under age 65. If you are over 65, the law goes into effect in 2016.
One final change to note is that after 2013, you will be required to prove health care coverage on your tax return each year. Your health insurance provider or employer will also have to submit relevant information to the IRS.
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