Tax Information Regarding the Upheld Healthcare Law

Health Care Law Upheld: With the Supreme Court (6/28/12) largely upholding the Affordable Care Act, taxpayers should continue preparing for the following provisions that become effective in 2013: (1) employer-provided health Flexible Spending Arrangements (FSAs) will be limited to $2,500 per year, (2) the hospital insurance portion of the FICA tax will be increased from 1.45% to 2.35% for wages over $200,000 ($250,000 if MFJ; $125,000 if MFS), (3) medical expenses will be deductible as itemized deductions only to the extent they exceed 10% of AGI (7.5% threshold will still apply to taxpayers who turn 65 before the end of the tax year), and (4) taxpayers with modified AGI over $200,000 ($250,000 if MFJ; $125,000 if MFS) will be subject to a 3.8% surtax on net investment income.

Health Care Penalty for Individual Noncompliance: A report by the Congressional Research Service (www.fas.org/sgp/crs/misc/R41331.pdf) summarizes the minimum essential health insurance coverage required by most individuals beginning in 2014 under the Affordable Care Act and explains the penalty provisions applicable for each month of noncompliance. In general, those who fail to meet the mandate will pay a penalty for each month of noncompliance on the greater of (1) a percepost_tage (1% in 2014, 2% in 2015, and 2.5% thereafter) of the amount an individual's household income exceeds the personal exemption plus the standard deduction amounts, or (2) a flat dollar amount assessed on each taxpayer and any dependents ($95 in 2014, $325 in 2015, and $695 in 2016 and beyond).

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