Can You Afford Not To Understand?
As you may recall, the Patient Protection and Affordable Care Act (PPACA) was signed into law on March 23, 2010. With most major provisions set to be phased in by January 2014, it’s important that you understand how the various provisions will affect you. Here are some new features to keep in mind.
- Flexible spending accounts. The annual pretax employee contribution to a Section 125 cafeteria plan flexible spending account (FSA) is reduced to $2,500, subject to annual increases for cost-of-living adjustments. The reduction does not apply to certain employer non-elective contributions (e.g., flex credits).
- Itemized deductions. The threshold for the itemized deduction for medical expenses increases from 7.5% to 10% of adjusted gross income, beginning in 2013. However, this increase is waived for taxpayers age 65 and older through 2016.
- Hospital insurance. The hospital insurance (HI) portion of the payroll tax, commonly referred to as the Medicare portion, increases by 0.9% for individuals with wages exceeding $200,000 ($250,000 for married couples filing a joint federal income tax return, and $125,000 for married individuals filing separately).
- Contribution tax. 2013 marks the imposition of a new 3.8% Medicare contribution tax on the unearned income of high-income individuals. This 3.8% contribution tax generally applies to the net investment income of individuals with modified adjusted gross income that exceeds $200,000 ($250,000 for married couples filing a joint federal income tax return, and $125,000 for married individuals filing separately).
Looking ahead, 2014 brings the implementation of health insurance exchanges, premium and cost-sharing subsidies and the requirement that most individuals have health insurance. There are many resources available to help you understand the conditions of the law and the other upcoming implementations. Contact your local financial professional, like a CPA, if you have questions about how the law impacts you.
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