The Affordable Care Act will cause many changes in the lives of Americans. One area you may, or may not, see change in is your taxes. For some, there will be big changes, while others may see no change at all. While the future is uncertain, we can look at how the act will affect 2013 taxes. If you’re a taxpayer, even a low-income taxpayer, you need to understand what these changes mean and how they could affect you.
Changes that could affect Everyone
One change that will affect a number of taxpayers is the limit on medical expenses that can be deducted from an itemized return. In order to be deducted, the expense must be at least 10% of the taxpayer’s adjusted gross income. Those that are 65 or older will be entitled to a 7.5% minimum. If you’re used to itemizing your taxes and deducting medical expenses, you need to pay close attention to this change.
High-Income Taxpayers and Medicare Taxes
Another tax change will affect those that make $200,000 or more per year. Those that make this much will automatically pay 0.9% more in Medicare taxes. Married couples that file jointly can make up to $250,000 and those that file singly can make up to $125,000. If your income falls into this bracket, you need to make sure you have enough coming out of your paycheck each month to cover the taxes or risk having a balance due at the end of the year. If you happen to overpay these taxes, you will be credited a refund when you file your taxes.
Those that fall into the high-income tax bracket could also see another tax on net investment income. The same income rules apply as listed above only the tax comes about as a result of money made on investments, such as dividends, passive income, etc. The 3.8% Medicare surtax can be devastating to those that make their entire income through investments or passive income.
Very High-Income Taxpayers and BIG Taxes
The new tax bracket for very high-income taxpayers is now 39.6% and these taxpayers are also subject to a 20% capital gain tax. If they happen to make their money from investments, the amount of tax owed could be unbearable. In fact, these taxpayers could be hit with four new taxes.
As a taxpayer, you need to be aware that the Affordable Care Act can have a negative impact on your income, especially if you’re a very high-income taxpayer. Take the time to look closely at these new laws to determine how health care and taxes will impact you next time tax season rolls around.