Thursday, December 25, 2014

Obamacare’s Impact on Your Taxes

There’s a lot of commentary and debate surrounding Obamacare, otherwise known as the Affordable Care Act. Proponents and opponents abound with every issue that it can be difficult to tell which side to trust. Granted, the manner in which the Act will be applied will differ from state to state and even person to person, but as an individual who pays his or her taxes, there are three particular aspects of Obamacare that you need to pay attention to:

Medicare tax will be higher for high earners

Single filers who earn more than $200,000 and couples earning over $250,000 will now have to pay a new marginal Medicare tax of 2.35 percent. This is because of the 0.9 percent Medicare tax increase that started being levied upon the Act’s implementation in 2013.

There will be a surtax on unearned income

Obamacare will add a 3.8 percent tax on net investment income for the statuses described above. Net investment income covers dividends, royalties, interest, gross income from a business endeavor that involves passive activities, gross income, rental income, and net gain from the sale of a property other than those held in a business or trade.

Medical expense deductions will be adjusted

Obamacare raises the adjusted gross income (AGI) threshold for claiming an itemized medical expense deduction from 7.5 to 10 percent, although the old threshold will still apply to individuals 65 and older (including their spouses) until 2016.

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