Tax Provisions of the Affordable Care Act Increase in AGI Limit for Deductible Medical Expenses In 2013 the limit for deductible medical expenses increased to 10 percent of AGI (7.5% in prior years); however, the 7.5 percent threshold continues through 2016 for taxpayers aged 65 and older, including those turning 65 by December 31, 2016. Health Coverage of Older Children The cost of employer provided health care coverage for children (through age 26) on tax returns is excluded from gross income. Medicare Tax Increases for High Income Earners Starting in 2013, there is an additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly). Also starting in 2013, there is a new Medicare tax of 3.8 percent on investment (unearned) income for single taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts and self-employed individuals are all liable for the new tax. Exemptions are available for business owners and income from certain retirement accounts, such as pensions, IRAs, 401(a), 403(b), and 457(b) plans, is exempt.
Posted on: Mon, 07 Oct 2013 11:30:00 +0000
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