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Happy New Year! YOU GET TO PAY MORE TAXES
Read this article in PDF form here.
By Katie Vlietstra
Individuals and families will see a little less in their paychecks starting January 1, 2014 – wage earners and self-employed individuals who make more than $200,000 (individual) and $250,000 (couple) will be assessed an additional 0.9 percent Medicare surtax on top of the existing 1.45% Medicare payroll tax as well as a 3.8% Medicare tax on unearned income ((investment dividends, rental income, interest and capital gains on property).
Individuals and families falling below the $200,000 will experience new restrictions on medical expense deductions and flexible spending accounts, including penalties for spending money on non-qualified medical expenses (simple human error!).
Additionally, tax payers who itemize their medical expense deductions will only be able to do so if those expenses exceed 10 percent of adjusted gross income (AGI); previously it was 7.5 percent. One caveat: individuals and/or your spouse who are 65 or older will be exempted from the increase and will still be able to use the 7.5 percent threshold.
The biggest tax hit will be faced by those individuals and families that fail to show proof of a qualified health care plan or a grandfathered health care plan for 2014. Failure to do so will result in a fine of $95 or 1 percent of your income – whichever is higher – in 2014. That fine increases to $325 or 2 percent of income in 2015 and $695 or 2.5 percent of your income by 2016.
Clearly challenges persist as it relates to the Affordable Care Act and its implementation; the NASE continues to work with lawmakers to mitigate the financial impact of the law on the 23 million self-employed who are working hard every day to fuel our economic recovery. Access to affordable and comprehensive health insurance shouldn’t have a negative tax impact on the self-employed.