Consumers Need to Be Aware of Tax Issues that Come With the ACA

As the Affordable Health Care Act rolls out, there are tax implications, potential penalties, and other considerations that may affect consumers, says Jeff Motske, president of Trilogy Financial Services. To pay for the benefits associated with the healthcare mandate, Congress has imposed new taxes and penalties on the wealthy, the healthcare sector, and on those who refuse to purchase health insurance (an estimated 32 million Americans). Many people are finding that state exchanges may be a good fit, due to potentially hefty federal tax credits that could help lower costs (the credits will be based on income and family size).

Those who don’t buy insurance are subject to the following penalties, which grow more severe in time:

• 2014 – $285 per family or 1% of the family’s income, whichever is greater.
• 2015 – $975 per family or 2% of income, whichever is greater.
• 2016 and beyond – $2,085 per family or 2.5% of income, whichever is greater.

Next year, the individual payroll tax for Medicare will increase from 1.45% to 2.35% for every dollar earned over $200,000 ($250,000/year for married couples). A 3.8% tax may be imposed on unearned income generated by dividends, interest income, capital gains and other forms of passive income, depending on your modified adjusted gross income.

Motske says that some investors are reducing their risk of paying higher taxes by selling stocks and bonds with capital gains and even selling businesses before the end of the year. Even those who earn less than $200,000 a year could face greater tax consequences if their net investment income or retirement distributions puts them over the $250,000 mark.

Also, he says that some may want to convert their IRAs into Roth IRAs before year’s end.

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Last Updated 06/29/2022

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