(PRWEB) March 26, 2010
Virginia Beach, VA (Vocus) March 26, 2010 -- In addition to having a major impact on the structure of health care costs for most Americans, the recently passed health care reform act will phase in many tax consequences for individual filers starting now and continuing through 2013.
“Americans have witnessed an historic health care bill become a reality. While navigating how this will affect payments for procedures and what we’ll pay in the future, it’s prudent to evaluate what tax changes will be phased in as a result,” said John Hewitt, CEO of Liberty Tax Service.
Liberty Tax has outlined these significant areas that will greatly impact how taxpayers can claim medical deductions and benefits:
A Change in the Threshold for Itemizing Medical Deductions:
One significant change on the horizon involves an increase in the threshold for itemized medical deductions that can be claimed. This Act raises the threshold for the itemized medical expense deduction from 7.5 per cent of Adjusted Gross Income (AGI) to 10 percent of AGI for regular income tax purposes, effective for tax years beginning after December 31, 2012. However, individuals age 65 and older (and their spouses) would be temporarily exempt from the increase. The exemption for seniors would apply to any tax year beginning after December 31, 2012 and ending before January 1, 2017 if the taxpayer or the spouse attained age 65 for the tax year.
Currently, when the taxpayer has paid health care expenses, they may have had larger itemized deductions to reduce their taxes. With the change, reduced health care costs could put them at a standard deduction. Even though lower health care costs may be more of a dollar benefit than lower taxes, taxpayers may not associate the two, and be unhappy with the higher tax bill.
An Increase on the Tax for Non-Qualified Distributions from HSA:
The Patient Protection Act, as amended, increases the additional tax on nonqualified distributions from health savings accounts (HSAs) from 10percent to 20 percent and from Archer MSAs from 15 percent to 20 percent effective after tax year December 31, 2010. This package also caps health FSA contributions at $2,500 per year after 2012, which is indexed annually for inflation after 2013.
A Nondeductible Flat Dollar Penalty for the Uninsured:
The Patient Protection Act, as amended by the House Reconciliation Act, imposes a nondeductible flat dollar-amount penalty of $95 per person without minimum essential coverage in 2014. The nondeductible penalty rises to $324 per person without minimum essential coverage in 2015, then to $695 per person without minimum essential coverage in 2016 and is indexed for inflation thereafter.
Medicare Payroll Taxes Will Increase:
An increase in Medicare payroll taxes starting in 2013 on taxpayers in the $200,000 plus income category ($250,000 for joint filers). Imposes an additional 0.9 percent on earned income in excess of $200,000 for individuals and $250,000 for families; and imposes an unearned income Medicare contribution of 3.8 percent on investment income for individuals with AGI above $200,000 and joint filers with AGI above $250,000.
There’s a New Therapies Tax Credit:
This Act creates a new two-year temporary tax credit to encourage investments in new health care therapies for tax years beginning in 2009 and 2010.
Premium Assistance Tax Credits Will Take Effect:
The Act provides premium assistance tax credits and reduced cost sharing to qualified individuals, on a sliding scale. The credit is designed to guarantee that qualified individuals would not spend more than a specific percentage of their income on medical insurance premiums. The package allows for the advanced payment of premium assistance tax credits and takes effect in 2014.
Changes for the Adoption Credit
This credit will become refundable, and will continue through 2011. The dollar limitation for the credit will increase by $1,000 to $13,170. It also has incentives for adopting children with special needs.
About Liberty Tax Service:
Liberty Tax Service is the fastest growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 7,000,000 individual income tax returns. With 41 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service (NYSE:JTX).
Liberty Tax Service provides computerized income tax preparation, electronic filing, refund loans, and online filing through eSmart Tax. Each office offers customers audit assistance, a money back guarantee, and free tax return checking. The Liberty Tax Service franchise opportunity is #9 on the fastest growing franchises list of the 2010 Entrepreneur “Franchise 500.”