Would You Be a Winner or a Loser Under the Proposed Health Care Law?

March 09, 2017

Regardless of what you think of the newly proposed Republican health care plan to replace the Affordable Care Act, one thing is for certain. As with all new laws, there will be both winners and losers. Here will be some of the individual winners and losers if the bill’s provisions become law:

WINNERS:

High Income Taxpayers: The bill would eliminate the Medicare payroll tax and the net investment income tax on individuals with MAGI over $200k a year and married couples with MAGI over $250k a year.

Tanning Salon Patrons: The bill would also eliminate the 10% excise tax on indoor tanning salons. This should make indoor tanning both cheaper and more available since the tanning industry claimed that nearly half of the nation’s tanning salons closed after the excise tax took effect. (However, it’s debatable whether they’re really “winners” given the health risks of indoor tanning.)

The Voluntarily Uninsured: Those who choose not to purchase health insurance would no longer be subject to a tax penalty. In fact, the law would be retroactive to 2016 so if you were subject to a penalty last year, you could file an amended return and get your money back.

Higher Income People Who Purchase Insurance Through the Exchanges: The ACA income-based premium subsidies would be replaced with new tax credits based on age for those who purchase insurance through the exchanges. The higher income you are, the likelier you are to benefit more from the tax credit. You can calculate the current subsidies here and see a comparison with the proposed tax credits here.

Younger People Purchasing Insurance Through the Exchanges: The law would allow insurance companies to discriminate more on age, which could mean lower premiums for younger people.

People Who Want to Contribute More to HSAs: The HSA contribution limits would nearly double to $6,500 for individuals and $13,000 for families and spouses over age 50 would be able to make additional catch-up contributions. You would also be able to use the HSA for certain medical expenses before the HSA was opened.

LOSERS:

Some Medicaid Beneficiaries: The law would cut funding to the states for Medicaid expansion.

Lottery Winners: Lottery winners would not be able to enroll in Medicaid.

Patrons of Planned Parenthood and Other Abortion Providers: Organizations that provide abortions would be de-funded.

The Involuntarily Uninsured: You would be subject to higher premiums if you neglect to purchase health insurance and later decide to enroll.

Lower Income People Who Purchase Insurance Through the Exchanges: The income-based premiums subsidies would be replaced by age-based tax credits that will be lower for most low income people. You can calculate the current subsidies here and a comparison with the proposed tax credits here.

Older People Purchasing Insurance Through the Exchanges: The law would allow insurance companies to discriminate more on age, which could mean higher premiums for older people.

Of course, no one knows what the final bill will look like after negotiations and whether it will even be passed into law. In fact, it doesn’t look too popular right now. Still, it could be useful to be aware of how the proposed provisions could affect you if any of them do become law. (Incidentally, I would currently be a “winner” under the bill since the only impact I can see on me is being able to contribute more to my beloved HSA.)

 

Junior’s Investment Income May Be Taxable

April 09, 2014

I have four children, two of which have custodial accounts. By definition, those custodial accounts belong to my children, and when they reach the age of majority—18 in most states—they technically can take that money and use it for whatever their hearts desire.  Until then, I’m the custodian of the account, and as the custodian, it is my responsibility to make sure the money is managed properly. Not only does that mean making sure the assets are invested wisely, but also making sure that any taxes associated with the account are reported accurately. Continue reading “Junior’s Investment Income May Be Taxable”

Can You “Burp” Away the Medicare Surtaxes?

November 19, 2013

Burping can relieve more than just stomach discomfort. It can actually relieve the pressure of the new 3.8% Medicare surtax, according to Steve Parrish, a Forbes contributor. His idea of “burping income” is that if a taxpayer can discharge some income at certain levels, it avoids an accelerated build-up of further taxes. This analogy can apply to various triggers in the tax code but is particularly appropriate to the Medicare surtax. Continue reading “Can You “Burp” Away the Medicare Surtaxes?”