Alloy Alert - Health Care Reform 2010
The Patient Protection and Affordable Care (PPAC) Act, as amended by the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act), was enacted to provide quality, affordable health care for all Americans. Although the primary thrust of the PPAC Act is health insurance reform, the tax law plays a key role in implementing that goal. Individuals receive benefits and are subject to responsibilities under the PPAC Act. Employers have many responsibilities to help achieve health insurance reform. These range from providing greater health insurance coverage and helping to pay for that coverage, to providing the information necessary to enforce the requirements of the new legislation. Health insurance providers also have many new requirements imposed by the legislation, including taxes, fees, reporting obligations, and limits on executive compensation. The following are highlights of the tax provisions of the PPAC Act. Several of these provisions take effect in 2010, but others are not effective until later years.
- Additional Medicare tax for high-income taxpayers. Beginning in 2013, individuals who earn more than $200,000 for the year ($250,000 for married couples) will be paying an additional 0.9 percent in Hospital Insurance (Medicare) tax.
- Medicare tax on investment income. Beginning in 2013, individuals whose adjusted gross income for the year exceeds $200,000 ($250,000 for joint filers), whether from wages or otherwise, will also be paying an additional 3.8 percent Medicare tax on net investment income.
- Employer penalty for failing to provide health insurance. Beginning in 2014, employers with 50 or more employees generally will be required to provide a minimum level of health insurance for their employees or pay a penalty per employee.
- Small employer tax credit. Beginning in 2010, small employers with no more than 25 employees are entitled to up to a 35 percent tax credit on the cost of providing health insurance for employees.
- New disclosure requirements for employers. For tax years beginning after December 31, 2010, employers are required to disclose the total cost of certain health insurance coverage provided to the employee on the employee’s Form W-2 regardless of whether the employee or the employer pays for the coverage.
- Information reporting required for health insurance coverage. Every employer who provides minimum essential coverage to an individual during a calendar year is required to file a return reporting such coverage.
- Penalty on individuals for failing to carry health insurance. Beginning in 2014, most individuals will be required to obtain health insurance or be subject to a penalty.
- Itemized deductions for medical expenses. Beginning in 2013, limits on tax-subsidized medical expenses will be imposed by raising the itemized medical expense deduction floor for regular tax purposes from 7.5 percent to 10 percent.
- Excise tax on patrons of indoor tanning salons. A 10 percent excise tax is added to the cost of indoor tanning services performed on or after July 1, 2010.
- Medical benefits for children under age 27. Beginning March 23, 2010, parents have the ability to cover adult children up to age 27 under their tax qualified employer-provided health plans.
This is a brief summary of highlights of the healthcare legislation. The details of the new provisions including definitions, calculations, procedures, and exceptions are too numerous to include in this email. In the near future, the IRS is expected to issue guidance on the provisions with effective dates in 2010 and 2011. In the meantime, if you have any questions about the new law, please do not hesitate to call our office.
Reprinted from CCH Client Letter Toolkit
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