Practical Tax Advice For Olympia Families – Health Care Law Changes In 2013

John Skeen of Bliss & Skeen Certified Public Accountants has been talking about taxation around the dinner table since he was thirteen.
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Submitted by Bliss & Skeen

John Skeen of Bliss & Skeen Certified Public Accountants has been talking about taxation around the dinner table since he was thirteen.

Now that President Obama has been reelected, the 2010 health care legislation he championed is likely to remain the law of the land. Although some provisions have already kicked in and many others are slated for 2014, here’s an overview of the key changes taking effect this year.

Medicare surtaxes. Two new Medicare surtaxes might affect high-income taxpayers. (1) A 3.8% surtax applies to the lesser of “net investment income” or the excess above $200,000 of modified “adjusted gross income” (AGI) for single filers and $250,000 for joint filers. (2) A 0.9% surtax applies to earned income above $200,000 for single filers and $250,000 for joint filers.

Medical deductions. The “floor” for deducting qualified medical expenses is raised from 7.5% of AGI to 10% in 2013, but remains at 7.5% of AGI through 2016 for those aged 65 or over.

Flexible spending accounts. Previously, there was no limit on contributions to a flexible spending account (FSA) used for health care expenses. Now the limit on contributions to health care FSAs is capped at $2,500.

W-2 reporting. For the first time, W-2s issued in 2013 for wages paid in 2012 must show the benefit employees receive from employer-sponsored health plans. 2012 reporting is optional for employers issuing fewer than 250 W-2s.

Health care tax credit for small businesses. Less than half of the small businesses that qualify are taking advantage of a new tax credit. Under the health care reform law, small businesses may qualify for a tax credit if they pay at least 50% of their employee’s health care premiums.

To qualify the business must employ fewer than 25 employees (special treatment for less than full time employees), with average annual wages of less than $50,000.

The maximum credit for tax years 2010 through 2013 is 35% of the premiums paid. For 2014 the credit increases to 50%.

If you have failed to take the credit in prior years, you can still file an amended tax return and claim the credit.

There’s much more to come. For details and planning guidance, contact our office.

Bliss & Skeen

2407 Pacific Ave Suite C

Olympia, WA 98501

360.754.5858

blisscpa@blisscpa.com

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