On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2012. As a result, there are several tax provisions that will affect both employers and individuals including:
- Additional Medicare tax on wages (2013): A 0.9 percent Medicare tax increase will be imposed on individuals with wages over $200,000. For married couples filing jointly, the threshold is $250,000. This Medicare tax increase does not apply to the employer’s share of the Medicare tax.
- New Medicare tax on investment income (2013):
A 3.8 percent tax will be imposed on the net investment income of a single taxpayer with adjusted gross income (AGI) over $200,000 or $250,000 for a married couple filing jointly. Individuals who are material participants in a trade or business may be exempt from this tax, and instead subject to self-employment taxes only on the portion of their income that represents compensation for services.
- Increase to the AGI limit of deductible medical expenses (2013):
In order for a taxpayer to claim an itemized deduction, medical expenses must exceed 10 percent of AGI, up from the current threshold of 7.5 percent. For taxpayers age 65 or older, the 7.5 percent threshold will continue to apply through 2016.
- Limit on employee contributions to health flexible spending arrangements (2013):
Employees can elect to contribute a maximum of $2,500 to an employer’s flexible spending arrangement.
At First Western Trust, we work actively with our clients to best position them to minimize the effects of these new taxes. For more information on how these changes may impact your specific situation, please contact your relationship manager or a member of our Wealth Advisory or Portfolio Management team at 303.531.8100.
To learn more about the tax provisions associated with the Affordable Care Act, please contact your tax advisor or visit: