Thursday , March 06, 2014 - 2:32 PM
As a reminder, medical expense deduction for 2013 is available for expenses more than 10 percent of the adjusted gross income versus 7.5 percent in past years.
As part of the Affordable Care Act, individuals are mandated to obtain minimum essential health insurance coverage for themselves and their dependents by 2014. Taxpayers who do not have affordable insurance through an employer may enroll in plans through Exchanges. The program began Oct. 1.
For those that fail to obtain health coverage a penalty will be assessed when they file their 2014 tax return. The penalty is calculated by the larger of a flat calculation or a percentage of income. The flat calculation is $95 multiplied by the taxpayer’s family size, (adults count as 1 and dependents under age 18 count as 0.5).
The maximum family size that may be used is 3. This calculates to $285 for 2014. However, the flat rate increases to $325 per person ($975 max) in 2015 and $695 per person ($2,085 max) in 2016.
The percentage of income is 1 percent of household income, which is adjusted gross income — nontaxable social security benefits plus exempt interest and excluded foreign income. This percentage increases in 2015 to 2 percent and 2.5 percent in 2016.
The tax penalty also has a limit. It cannot be greater than the national average premium for a bronze level plan for the taxpayer’s family size.
Also new to 2013 is the contribution limit to a Flexible Spending Account which is $2,500. Both Health Savings Accounts and Flexible Spending Accounts can no longer reimburse for over the counter medications (2011) unless it is prescribed by a doctor.
To enroll in the Exchange and obtain health insurance benefits, you are expected to use your 2012 tax return for the adjusted gross income. If you expect to make more than 2012, you need to factor this in when estimating your household income. A subsidy is given for certain income levels to assist in getting affordable health care. If your income is higher than what was estimated, you may have to pay back some or the entire advance subsidy that was paid by the government. If your income is less than what was estimated, you will receive the difference as a refundable tax credit.
For more information on the penalties in regards to the Affordable Care Act visit http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-the-Premium-Tax-Credit
Tracy Bunner is an enrolled agent and tax preparer with an office in Harrisville. She can be reached at 801-686-1995 or at email@example.com.
Sign up for e-mail news updates.