Millions are without power, fires continue to rage in Colorado (though they finally seem to have calmed down), and, of course, the Obamacare ruling from the Supreme Court last week.
Oh, and I think there’s a holiday of some sort this week?
As a tax professional, I have a certain fondness for July 4th — what with taxes being at the root of it all. Sad to say that the whole “no taxation without representation” hubbub now seems a bit … oh, quaint?
But seen against the circumstances of the day, the Declaration was an act of incredible bravery by many people with a lot to lose by adding their names to it. It’s one of many inspiring acts by our Founders, and rightly worth tossing rockets into the air to celebrate and honor (if not more than that!).
But while we’re on the subject of taxes, I thought I’d point out to you some of the major implications of Obamacare on taxes. Of course, there is more to consider regarding this bill than taxes only, but that’s, obviously, where my primary interest on your behalf lies. This year, more than any other year in memory, it PAYS to plan ahead with your taxes.
Shakopee, MN Tax Preparer Highlights How Obamacare’s Tax Provisions Could Affect You
I’ve pulled out the important provisions for you today, but this is, by no means, an exhaustive list. For an even more complete listing of tax provisions (and the primary reference I used for this article), go here: http://www.journalofaccountancy.com/News/20125972.htm
IMPORTANT NOTE: This article is ONLY about the ACA, aka “Obamacare”. There are a whole host of tax changes coming on January 1st which have nothing to do with this law per se (capital gains increase, tax rate increases, etc). Here, I’ve simply tried to highlight what’s in this law only.
Medical Expense Deduction Now With Higher Threshold: The medical expense deduction that currently applies to medical expenses over 7.5% of adjusted gross income will increase to 10% making that even more difficult to receive a medical deduction.
Medical FSA’s Gutted: Under current law, you can put an unlimited amount — up to your earned income — in a medical flexible spending account. Beginning in 2013, that limit will decrease to $2,500 as a result of the government’s efforts to raise funds to supplement public health insurance.
Medicare “Contribution Tax”: This 3.8% tax will be paid by those individuals with an income above $125K (filing separately; $250K for filing jointly). The Medicare contribution tax is on net passive income — investment income, interest and dividends, royalties, rents, capital gains, annuities, etc. — in which high-income individuals will pay an additional 3.8% on that income over those levels. For example, if you are married filing jointly and your total income is $260,000, with $20,000 of it from interest, only $10,000 will be subject to that 3.8% tax.
Further, for high-income earners, a hospital insurance tax of 0.9% will be levied ($250K married filing jointly, or $125K single) effective after Dec. 31, 2012.
Again, as I noted above, this is ONLY related to Obamacare. There’s much more to deal with, from a tax perspective, coming down the pike in other bills. Call us with any questions: 952-445-8753