If you’ve heard about the new healthcare bill President Trump wants to pass, there are some things you need to know on how it might affect you and your taxes. In a brief blog post, written by Kent Livingston, he discusses the new proposal and how it could bring about noteworthy changes of which you should be informed.
Since President Trump and his administration took office in January there has been much hubbub about the Affordable Care Act, otherwise known as Obamacare. Of course, this was a hot topic throughout the campaign and it has remained on the forefront of the new administration’s agenda since they took control of the White House. After a previous attempt to repeal the ACA failed in March, early May the Trump administration introduced another plan that passed the House in its first attempt: the American Health Care Act, or AHCA. However, that doesn’t mean the fight is over. In fact, the bill still has to clear the Senate and at this point the outcome is anything but certain, with many senators already opposing the bill.
In any case, the new proposal would lead to several significant changes, including changes to your taxes, if it does become law, and therefore you should be aware of how it would affect you should it pass.
No Penalty for Not Having Insurance – For starters, one of the biggest complaints about Obamacare was the individual mandate to have insurance and the penalty for not complying. The new bill would eliminate this penalty and thus save taxpayers who choose to go uninsured hundreds of dollars a year and in some cases thousands. The change would be effective this year.
Repeal Premium Tax Credit – The new AHCA would also repeal the premium tax credit and replace it with a new health insurance coverage credit tax, which would take place in 2020. This credit would be calculated monthly and the credit would be based on the taxpayer’s qualified coverage for the given month.
Repeal 0.9% Medicare Tax – The AHCA would also get rid of the 0.9 percent Medicare tax that people who make over a certain amount have to currently pay under the ACA. This would take place in 2023.
Repeal the 3.8% Medicare surtax on Capital Gains – Under Obamacare individuals who made over $200,000 AGI and married filers who made more than $250,000 AGI were forced to pay an additional 3.8 percent on top of the 20 percent they made from selling investments. This is another change that would take place this year and would be a big boost to the wealthy.
Change Threshold for Itemized Medical Expense Deductions – Before the ACA was in place you could claim as part of your itemized deductions any amount you paid in medical expenses that exceeded 7.5 percent of your AGI. However, Obamacare changed that threshold to 10 percent. The new administration wants to lower the threshold to 5.8 percent starting this year.
No Cap on FSA Contributions – Employer flexible spending accounts are a great way to pay for medical expenses and the money comes from pretax income so it doesn’t count against your tax bill. However, Obamacare put a cap on the amount you could set aside in one of these accounts at $2,500. The AHCA would get rid of this cap starting this year.
Increase the maximum contributions for Health Savings Accounts – Beginning next year, the AHCA would increase the maximum amount you can donate each year to your health savings account (HSA). You can deduct these contributions from your federal taxes and starting next year the maximum amount you can contribute would nearly double.
It will be interesting to see what happens with this bill, and the changes that will occur if it passes the Senate vote and is signed into law.
Kent Livingston has been writing financial articles many years and covers various topics including state and federal tax issues.