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Tax Increases Included in New Health Care Law

1.      Individual Mandate Excise Tax* (Starting in 2014) anyone not buying health insurance that meets a standard determined by the federal government must pay an income surtax according to the higher of the following (AGI = Adjusted Gross Income)

I adult                          2  adults                      3+ adults

a.      2014                1% AGI or $95             1% AGI or $190           1%AGI or $285

b.      2015                2%AGI/$325                2%AGI/$650                2%AGI/$975

c.       2016                2.5%AGI/%695            2.5%AGI/$1390           2.5%AGI/$2085

(Exemptions will be provided for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes and hardship cases (as determined by the federal government.)

*This tax was repealed by H.R. 1, the Tax Cuts and Jobs Act

2.      Employer mandate tax (2015)  If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2,000 for all full-time workers.  (This provision applies to companies with 50 or more employees.)  If any employee actually receives coverage through the new health insurance exchange, the penalty on the employers rises to $3,000 per employee.  If the employer requires a “waiting period” of 30-60 days for the employee to enroll in the employer’s health plan, there is a $400 per employee tax ($600 if the period if 60 days or longer.)

3.      Surtax on Investment Income (2013) – This tax increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 per year ($200,000 for single taxpayer.) The 3.8 percent surtax does not apply to non-resident aliens.

4.      Excise tax on Comprehensive Health Insurance Plans (2018*) This is a new 40 percent excise tax on so-called “Cadillac: health insurance plans ($10,200 single/$27,500 family).  For early retirees and high-risk professions (@$11,500 single/$29,450 family), a higher threshold exists: consumer price index + 1% (indexed for inflation.) *Moratorium on taxation through 2021.

5.      Hike in Medicare Payroll Tax (2013)

6.      Medicine Cabinet tax (2011) – American no longer able to use health savings account (HSA), flexible spending account (FSA) or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over the counter medicines (except insulin.)

7.      HSA Withdrawal Tax Hike (2011) - Increase the additional tax on non-medical early withdrawals from an HSA from 10 percent to 20 percent.

8.      Flexible Spending Account Cap (Special Needs Kids Tax) (2013) – Imposes a cap of $2,500 (indexed to inflation) on FSAs (currently unlimited). (There are thousands of families with special needs children in America and many use FSAs to pay for special needs education.)

9.      Tax on Medical Device Manufacturers (2013*) – a brand new 2.3 percent on the whole range of medical devices retailing for over $100. *Moratorium on taxation in 2016 and 2017. *Moratorium on taxation through 2019.

10.  Higher “Haircut” for Medical Itemized Deduction (2013) – From current 7.5 percent to 10.5 percent.  Currently those facing high medical expenses are allowed a deduction for medical expenses to extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).  This provision is waived for taxpayers older than 64 for the years 2013-2016 only.

11.  Tax on indoor tanning services (2010) – New 10 percent tax on Americans using tanning salons.

12.  Elimination of tax deduction for employer-provided prescription drug coverage in coordination with Medicare Part D. (2013)

13.  Blue Cross/Blue Shield Tax Increase (2010) – The current tax deduction for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services.

14.  Excise tax on Charitable Hospitals (2010) -$50,000 per hospital per year if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by the federal government.

15.  Tax On Drug Company Innovators (2014) - $2.3 billion annual tax /on the industry imposed relative to the share or sales made last year.

16.  Tax on Health Insurers (2014) - Annual tax on the industry imposed relative to health insurance premiums collected that year.  The stipulation phases in gradually until 2018 and is fully imposed on firms with $50 million in profits.

17.  $500,000 Annual Compensation Limit for Health Insurance Executives. (2013)

18.  Employer Reporting of Insurance on W-2 forms (2011) – Preamble to taxing health benefits on individual tax returners.

19.  “Black Liquor” tax hike of $23.6 billion on this type of bio-fuel.

20.  Codification of the “economic substance doctrine”– this $4.5 billion tax hike allows the IRS to disallow completely legal tax dedications and other tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owned.