Affordable Care Act Highlights

We've highlighted important aspects of the Affordable Care Act. If you do have questions, please contact us.

Net Investment Income Tax

The net investment income tax goes into effect starting in 2013. This is a 3.8% tax on investment income if your modified adjusted gross income is over the following thresholds.

Threshold Amounts:

  • Married Filing Jointly - $250,000
  • Single and Head of Household - $200,00
  • Married Filing Separately - $125,000

The following items are investment income for purposes of this tax:

  • Interest
  • Dividends
  • Non-qualified annuities
  • Rents
  • Capital Gains
  • Royalties, other than non-passive income
  • Passive activity income
  • Distributions in excess of basis

Additional Medicare Tax on Wages and Self-Employment Income

This tax goes into effect starting in 2013. This is a .9% tax on wages and self-employment income only. The same income threshold amounts apply to this tax as to the Net investment income tax. Employers will withhold this amount if an employee makes over the threshold, but some taxpayers will meet the threshold through multiple wage sources. In this case, it won't be withheld from their wages, but paid with the tax return.

Individual Health Insurance Mandate

Individuals must purchase health insurance effective in 2014 or be subject to a penalty on their tax return. For 2014, the penalty is the greater of 1% of applicable income or $95. The penalty increases each year. The penalty amount cannot exceed the cost of a bronze health insurance plan purchased through the health exchange. Children will also be subject to the penalty, at the rate of 50% of the adult penalty. The person claiming the child as a dependent will be responsible for paying the child's penalty.

*There are several exceptions to the penalty.

Health Insurance prices will be determined by 4 factors

  1. Age
  2. Premium ratings (high/low cost areas)
  3. Number of family members
  4. Tobacco use

Premium Assistance Credit

This is a refundable credit available to help with health insurance costs based on income level. Insurance must be purchased through the government exchange to be eligible. May be eligible if employer coverage is unaffordable (if self-only coverage cost exceeds 9.5% of household income)

Income Qualifications

  • Single people qualify if their income is $45,960 or less
  • Families of two qualify if their income is $62,040 or less
  • Families of four qualify if their income is $92,400 or less

Employer-Offered Health Insurance Mandate

Businesses with more than 50 full-time equivalent employees that don't offer health insurance coverage or whose coverage is not considered affordable will have to pay penalties starting in 2015. Thirty (30) hours per week is considered full-time employment for this purpose. Part-time workers' hours are figured into the calculation to determine if you have 50 full-time equivalent employees.

Penalties

  • Penalty for no coverage: Will be asses if a business does not offer the minimum essential insurance to at least 95% of full time employees,including dependents. The penalty is not calculated on the first 30 employees, after that you pay $2,000 per employee.
  • Penalty for Unaffordable Coverage: The business offers health insurance coverage, but at least 1 employee qualifies for premium assistance credit. (Discussed in Individual Mandate above). The penalty is the LESSER of $3,000 per employee receiving premium assistance OR $2,000 per employee (not counting the first 30 employees).

Download our Affordable Health Care Act Highlights

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