healthcare reform: an update and it's tax effect on your firm
TRANSCRIPT
Health Reform: The Tax Effect
FDR’s New Deal – Social Security introduced; FICA Tax
Social Security and Medicare
History of FICA (Federal Insurance Contributions Tax) as Imposed on Wages
No federally mandated benefits
Lyndon Johnson and Congress - Medicare passed
1920’s………………………………….1933………………………………………………….1965………………………………………………………………….2013 (Health Care Reform)
Affordable Care Act – 3.8% on investment income; .9% additional Medicare
Decoupling of Medicare Tax from Social Security Tax
No limit on Medicare tax paid @ 1.45%
Now, based on AGI limit, additional .9% for total of 2.35%
AGI limits - $200k single, $250k married filing jointly (MFJ)
It’s Complicated, but...
Rate is 3.8% on
Lesser of Net Investment Income or amount by which AGI exceeds $250k MFJ, $200k single
So,
Possible top rate is:39.6% 3.8%43.4%
Add MD 9.0%52.4%
Net Investment Income Tax (NIIT Tax)
Interest
Dividends
Rents
Royalties
Capital Gains
Passive Activities
What is Net Investment Income?
Salaries
Self Employment Income
Non-Passive Business Income
Social Security
Tax-exempt Interest
Qualified Pension Income
IRA Distributions
Annuity Income
What is not Net Investment Income?
Summary Report- Case 1
2012
Adjusted Gross Income $173,250
Personal Exemptions (7,600)
Total Itemized (17,421)
Taxable Income 148,229
Regular Tax:
Schedule of Table Tax 29,283
Alternative Capital Gains Tax 26,617
Appropriate Regular Tax 26,617
Net Alternative Minimum Tax 0
High Income HI, Medicare & Other Tax 0
Total Federal Taxes 26,617
Resident State Tax 9,821
Total Taxes $36,438
Marginal Nominal Federal Rate 25
Marginal Federal Rate with Phaseouts 25
Marginal Resident State Rate 8
2013
$173,250
(7,800)
(17,421)
148,029
28,914
26,365
26,365
0
0
26,365
9,821
$36,186
25
25
8
* INT & DIV $100,000
SS Benefits 38,250
Net Cap Gains 35,000
AGI $173,250
Summary Report- Case 2
2012
Adjusted Gross Income $373,250
Personal Exemptions (7,600)
Total Itemized (34,725)
Taxable Income 330,925
Regular Tax:
Schedule of Table Tax 86,112
Alternative Capital Gains Tax 81,612
Appropriate Regular Tax 81,612
Net Alternative Minimum Tax 9,341
High Income HI, Medicare & Other Tax 0
Total Federal Taxes 90,953
Resident State Tax 27,125
Total Taxes $118,078
Marginal Nominal Federal Rate 28
Marginal Federal Rate with Phaseouts 35
Marginal Resident State Rate 9
2013
$373,250
(3,120)
(32,570)
337,560
87,708
83,208
83,208
6,808
4,684
94,700
27,168
$121,868
28
35
9
*$200,000 additional INT & DIV.
Summary Report- Case 3
2012
Adjusted Gross Income $623,250
Personal Exemptions (7,600)
Total Itemized (57,100)
Taxable Income 558,550
Regular Tax:
Schedule of Table Tax 164,632
Alternative Capital Gains Tax 159,632
Appropriate Regular Tax 159,632
Net Alternative Minimum Tax 7,820
High Income HI, Medicare & Other Tax 0
Total Federal Taxes 167,452
Resident State Tax 49,500
Total Taxes $216,952
Marginal Nominal Federal Rate 28
Marginal Federal Rate with Phaseouts 28
Marginal Resident State Rate 9
2013
$623,250
0
(47,517)
_575,733
175,636
170,736
170,736
0
_ 10,646
181,382
49,615
$230,997
40
41
9
*$250,000 wages added
Small Business Tax Credit
No more than 25 full-time equivalent employees Average annual wages for the employees cannot
exceed $50,000 in 2014, (will be adjusted for inflation)
Must purchase coverage through the SHOP Marketplace (Small Business Health Options)
Credit = to approx. 50% of employer contributions to health care premium
Available to certain eligible employees
Must cover at least 50% of the cost of employee-only coverage for each employee
Medical Device Excise Tax
Only for manufacturers and importers of “medical devices”
Confusion in definition of taxable “medical device”Must be “intended for humans”Retail exemption i.e. eyeglasses, contact, hearing aids,
etc.
Rate 2.3%
Annual Fee on Health Insurance Providers
In 2014, the fee is $5.25 per member per month ($63 per year)Includes not only the employee, but dependents – ALL COVERED LIVES
In 2015, the fee is $3.67 per member per month ($44 per year)Insurers will raise premiums to pass on to customers
• Assessed on insurance carriers, HMO’s, etc.
• Fee is NOT tax deductible
• First year is 2014
• Fee is permanent
PCORI Fee – Patient-Centered Outcomes Research Institute Fee
Period – 2012 to 2019
Amount $1 to $2 per member per year
Insurers have/will add to premium
THANK YOU!
Contact Info:
Steven Gershman, CPA, PFS, CFEShareholder443.539.3201sgershman@katzabosch.comwww.katzabosch.com