Will You Pay The New ObamaCare Tax?
Now that Obama-care has been blessed by the Supreme Court, those couples with incomes over $250,00 a year and singles over $200,000 should be aware that your taxes could well be going up January 1.
When Congress passed Obama-care in 2010 it added a new surtax. While we are waiting for conformation from the IRS, it is believed that the new tax applies to the following:
Short and long-term capital gains
Taxable portion of annuity payments
Income from the sale of a principal home (above the exclusion),
Net gains from the sale of a second home
Passive income from real estate or investments
The new tax doesn’t apply to income from a regular or Roth IRA, 401(k) plan or pension, Social Security, life-insurance proceeds, municipal-bond interest, Schedule C income from businesses, or earned income on which you are paying self-employment tax.
As of Jan. 1, 2013, the tax rates on dividends for high-income earners will increase from their current historic low of 15% to 18.8% or 23.8% or higher if Congress does not extend the Bush Tax cuts.
What you should do now?
Consult with your tax professional now and verify if you will be impacted by the new tax. I made this recommendation to a client and her tax professional was unaware of the new surtax so ask the specific question. “Will I be impacted by the new Obama-care Tax and what should I do about it?”
The new 3.8% tax could make accelerating income into 2012 worthwhile. This would include those with a large stock concentration and had planned to sell over time and then diversify or anyone planning on selling their expensive home or investment property or even a business.
For those people who would not normally be impacted by the law but are planning to convert an IRA to a Roth IRA, they too should consult their tax professional about doing it in 2012 to avoid being impacted by the new tax later.
If there are assets in a trust with a separate Tax ID number and more than $12,000 of income, the new law applies as well. Therefore if there are assets in the trust with appreciation that you plan to sell in the near future, you may wish to sell in 2012 rather than 2013 since capital gains are not usually distributed as income to the beneficiaries and could be subjected to the added tax with in the trust.
If you are impacted by the new law and hold mutual funds invested in actively managed equities you may wish to liquidate these and reinvest in a passively managed diverse funds such as those offered by Dimensional Fund Advisor (DFA). These funds have below average turnover, which deceases capital gains. At the same time they have below average expense ratios (which is a whole other story).
Some investors may consider selling dividend generating investments and moving to tax-free investments since they will not impacted by the new law.
Starting in 2013, impacted investors will need to manage not only their adjusted gross income but also their investment income in order to avoid or minimize this tax.
Will You Pay The New ObamaCare Tax? - Forbes
Re: Will You Pay The New ObamaCare Tax?
Here Are The New Taxes You’re Going To Pay For Obamacare
Well, Obamacare is now official, which means that a lot more people in the United States will have health insurance.
And it also means a lot more people will be paying more taxes.
(You didn't think Obamacare was free, did you?)
Here are some of the new taxes you're going to have to pay to pay for Obamacare:
A 3.8% surtax on "investment income" when your adjusted gross income is more than $200,000 ($250,000 for joint-filers). What is "investment income?" Dividends, interest, rent, capital gains, annuities, house sales, partnerships, etc. Taxes on dividends will rise from 15% to 18.8%--if Congress extends the Bush tax cuts. If Congress does not extend the Bush tax cuts, taxes on dividends will rise from 15% to a shocking 43.8%. (WSJ)
A 0.9% surtax on Medicare taxes for those making $200,000 or more ($250,000 joint). You already pay Medicare tax of 1.45%, and your employer pays another 1.45% for you (unless you're self-employed, in which case you pay the whole 2.9% yourself). Next year, your Medicare bill will be 2.35%. (WSJ)
Flexible Spending Account contributions will be capped at $2,500. Currently, there is no tax-related limit on how much you can set aside pre-tax to pay for medical expenses. Next year, there will be. If you have been socking away, say, $10,000 in your FSA to pay medical bills, you'll have to cut that to $2,500. (ATR.org)
The itemized-deduction hurdle for medical expenses is going up to $10,000. Right now, any medical expenses over $7,500 per year are deductible. Next year, that hurdle will be $10,000. (ATR.org)
The penalty on non-medical withdrawals from Healthcare Savings Accounts is now 20% instead of 10%. That's twice the penalty that applies to annuities, IRAs, and other tax-free vehicles. (ATR.org)
A tax of 10% on indoor tanning services. This has been in place for two years, since the summer of 2010. (ATR.org)
A 40% tax on "Cadillac Health Care Plans" starting in 2018.Those whose employers pay for all or most of comprehensive healthcare plans (costing $10,200 for an individual or $27,500 for families) will have to pay a 40% tax on the amount their employer pays. The 2018 start date is said to have been a gift to unions, which often have comprehensive plans. (ATR.org)
A"Medicine Cabinet Tax" that eliminates the ability to pay for over-the-counter medicines from a pre-tax Flexible Spending Account. This started in January 2011. (ATR.org)
A "penalty" tax for those who don't buy health insurance. This will phase in from 2014-2016. It will range from $695 per person to about $4,700 per person, depending on your income. (More details here.)
A tax on medical devices costing more than $100. Starting in 2013, medical device manufacturers will have to pay a 2.3% excise tax on medical equipment. This is expected to raise the cost of medical procedures. (Breitbart.com)
So those are some of the new taxes you'll be paying that will help pay for Obamacare.
Any big ones I've missed?
Note that these taxes are both "progressive" (aimed at rich people) and "regressive" (aimed at the middle class and poor people). The big ones--the 3.8% investment income hike and the Medicare tax increase--only hit you if you're making more than $200,000 a year. The rest hit you no matter how much you're making.
Here's How Much The Obamacare Penalty Tax Will Cost You
Many Americans are furious that Obamacare will require them to buy health insurance.
Most of these folks seem to hate the idea that Obama is forcing them to do something more than they hate the idea of shelling out money.
But for those who also care about the money, here are the details.
The good news is that, for most people, the "penalty tax" for those who choose not to buy health insurance will cost a lot less than health insurance.
As with everything tax-related, there's no simple answer to "How much is the Obamacare penalty tax?" But here are some key points, from FactCheck.org:
The penalty/tax will be phased in from 2014 to 2016.
The minimum penalty/tax in 2016 will be $695 per person and up to 3-times that per family. After 2016, these amounts will increase at the rate of inflation.
The minimum penalty/tax per person will start at $95 in 2014 (and then increase through 2016)
No family will ever pay more than 3X the per-person penalty, regardless of how many people are in the family.
The $695 per-person penalty is only for those who make between $9,500 and ~$37,000 per year. If you make less than ~$9.500, you're exempt. If you make more than ~$37,000, your penalty is calculated by the following formula...
The penalty is 2.5% of any household income above the level at which you are required to file a tax return. That level is currently $9,500 per person and $19,000 per couple. The penalty on any income above that is 2.5%. So the penalty can get expensive quickly if you make a lot of money.
However, the penalty can never be more than the cost of a "Bronze" heath insurance plan purchased through one of the state "exchanges" that will be created as part of Obamacare. The CBO estimates that these policies will cost $4,500-$5,000 per person and $12,000-$12,500 per family in 2016, with the costs rising thereafter.
So, basically, you're looking at penalties of approximately the following at the following income levels:
Less than $9,500 income = $0
$9,500 - $37,000 income = $695
$50,000 income = $1,000
$75,000 income = $1,600
$100,000 income = $2,250
$125,000 income = $2,900
$150,000 income = $3,500
$175,000 income = $4,100
$200,000 income = $4,700
Over $200,000 = The cost of a "bronze" health-insurance plan
The IRS will collect the penalty-tax, a fact that will no doubt further enrage those who hate Obamacare.
But here's some more good news for those folks:
The IRS will not have the power to charge you criminally or seize your assets if you refuse to pay. The IRS will only have the ability to sue you. And the most the IRS can collect from you if it wins the suit is 2X the amount you owe. So if you want to thumb your nose at the penalty-tax, the IRS won't be able to do as much to you as they could if you refused to pay, say, income tax.
Here Are The New Taxes For You
Re: Will You Pay The New ObamaCare Tax?
I thought it was free healthcare???
Oh well, I'll just lay off a few employees to compensate for my tax increases.
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