healthcare and tax lawsAffordable Care Act

In 2010 the Patient Protection and Affordable Care Act (PPACA) was brought into effect. It has since then dramatically changed the health-insurance field. It has also caused dramatic changes to taxes. Read more to find out what some of these changes are and how they affect you.

Minimum Essential Coverage

Starting in 2014 almost everyone in the United States became required to maintain health insurance coverage. This coverage must be equal to what  is described in the PPCA as minimum essential coverage. Anyone who fails to meet this requirement throughout the year must pay a penalty. The penalties are as follows:

  • 2014
    • $95 per household member that is over 18 years old. $47.50 per household member that is under 18 years old. With a maximum penalty of $285 per household. Or,
    • 1% of taxable income. Whichever of the two is greater.
  • 2015
    • $325 per household member that is over 18 years old. $167.50 per household member that is under 18 years old. With a maximum penalty of $975 per household. Or,
    • 2% of taxable income. Whichever of the two is greater.
  • 2016
    • $695 per household member that is over 18 years old. $347.50 per household member that is under 18 years old. With a maximum penalty of $2,085 per household. Or,
    • 5% of taxable income. Whichever of the two is greater.

New Tax Forms

With the requirement to maintain health insurance coverage, come new tax forms. These forms serve a variety of purposes, such as providing proof that you maintained coverage or calculating your penalty for not maintaining coverage. Some of these forms include the following:

  • Form 1095-A: Health Insurance Marketplace Statement
    If you signed up for a health plan through the Health Insurance Marketplace you will receive a Form 1095-A. This form provides the information your tax preparer needs to complete your Form 8962 (see below). If you have family members enrolled in different plans through the Marketplace, you will receive a 1095-A for each additional plan.
  • Form 1095-B: Health Coverage
    Your health insurance provider will send you a Form 1095-B as a proof of health insurance coverage. It will include the information you need to prove that you and anyone else in your family had qualifying coverage.
  • Form 1095-C: Employer-Provided Health Insurance Offer and Coverage
    If you receive your health insurance coverage through your employer instead of through the Marketplace, you will receive a Form 1095-C. This form will contain the information that you need to prove you had sufficient coverage on your tax return.
  • Form 8962: Premium Tax Credit
    If you purchased your health insurance coverage through the Marketplace and you are eligible for the Premium Tax Credit, your tax preparer will complete this form as part of your tax return.
  • Form 8965: Health Coverage Exemptions
    This form will outline your reason for not maintaining Minimum Essential Coverage. There are a few situations for which you can claim to be exempt from maintaining Minimum Essential Coverage. These reasons include, but are not limited to:

    • Religious exemptions
    • Being a member of a health sharing ministry
    • Being a member of a Native American Tribe
    • Currently incarcerated

$99 Tax Preparation

Increased Taxes for High Earners

Starting in 2013 the PPACA will add an additional 0.9% on the HI tax. This tax will be on earnings that exceed the following thresholds:

  • $200,000 for taxpayers filing as single or head of household
  • $250,000 for taxpayers filing as married filing jointly or surviving spouse
  • $125,000 for taxpayers filing as married filing separately

If you fall in this category, what does this mean for you? You will be taxed a total of 2.35% (1.45% + 0.9%) on all income exceeding the threshold amounts. It is important to note that this tax is only imposed on the employee’s side of social security taxes, the employer is not affected by the rate increase.

Conclusion

The PPACA has created expansive changes to healthcare and tax laws.  The changes to tax laws outlined in this article barely scratch the surface. Schedule a meeting with your qualified tax preparer if you are worried about how these changes will affect your taxes. They will be able to explain the changes in depth, as well as how these changes will personally affect you and your family.

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