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Healthcare Bill has Tax Consequences for US Taxpayers

September 1st

While there has been much discussion previously of the impact that the healthcare reforms will have on the US budget, little has been said about its long-term effects for average American taxpayers. As the government continues to make cuts and examine the possibility of tax increases while slowly implementing last year’s healthcare law, it is important to know how these reforms will impact your tax bill.

The healthcare law passed in 2010 was full of new taxes and tax increases that will affect many individuals and businesses. There are also a number of tax deductions, designed to help both individuals and businesses pay for insurance.

However, keep in mind that several of these changes are not due to be implemented for some time yet.

1. A new 10 percent excise tax on indoor tanning services. This tax applies to all tanning services received after June 30, 2010.

2. Tax incentives for small firms. These incentives are mostly given in the form of tax credits, to encourage smaller businesses to provide health coverage for their employees. Employers with 10 or fewer workers and average annual wages totalling less than $25,000 can receive a deduction of up to 35 percent of their health premium costs each year.

3. Penalty increases for nonqualified distributions from Health Savings Accounts. The penalty for nonqualified distributions has doubled, as of 2011.

4. Cap on contributions to healthcare flexible spending accounts. As of 2013, the government plans to limit the amount employees can deposit in their healthcare flexible spending accounts to $2,500 a year.

5. A new excise tax on high-cost health plans. Beginning in 2018, the IRS will implement a 40 percent excise tax on high-cost health plans. The tax will be levied only on any funds that exceed $10,200 for individuals and $27,500 for families.


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