Healthcare Reform: What It Means for You
On June 28th, 2012, the U.S. Supreme Court generally upheld the Patient Protection and Affordable Care Act of 2010. The decision has far-reaching implications, many of which will financially impact businesses and individuals – and their taxes. As your trusted business advisors, Lewis & Knopf wanted to provide you with a timely overview of the changes the upheld legislation will affect.
The main provision at issue in the Supreme Court proceedings was whether it was constitutional for the act to require, that starting in 2014, most employers offer a basic level of health insurance or pay a penalty. In a 5-4 decision, the Court found the provision to be constitutional within Congress's power under the taxing clause.
Some key provisions affecting businesses include the following:
Tax credits for certain small businesses that provide health care coverage to employees. This provision went into effect in 2010 and is available through 2013.
Penalties for failing to provide health care coverage. These are scheduled to go into effect in 2014.
Various requirements related to the scope of health care coverage provided. Examples include coverage of employees' young adult children and limits on waiting periods for coverage under a group policy. Some requirements went into effect in 2010; others are scheduled to go into effect in 2014.
And, here are some key provisions affecting individuals:
Higher Medicare taxes for high-income taxpayers. Starting in 2013, taxpayers with earned income in excess of certain limits will pay an additional 0.9% Medicare tax on the excess. In addition, taxpayers will pay a new 3.8% Medicare tax on unearned income, such as interest, dividends, rents, royalties and certain capital gains, to the extent that their modified adjusted gross income exceeds certain thresholds.
Increase in medical expense deduction floor. Starting in 2013, the act raises the threshold for deducting unreimbursed medi¬cal expenses from 7.5% to 10% of adjusted gross income.
Changes to Flexible Spending Accounts (FSAs) for health care. Starting in 2011, tax-free FSA distributions could no longer be used to pay for unprescribed over-the-counter medicine. Starting in 2013, contributions to FSAs for medical expenses will be limited.
Please keep in mind that we have described only the highlights of the most important changes in the new law. If you would like more details about any aspect of the new legislation, please do not hesitate to contact the professionals at Lewis & Knopf at 810-238-4617.