Happy New Year! You Get To Pay More Taxes.

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Happy New Year! You Get To Pay More Taxes.

Dec 17, 2013
Posted 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 .9% 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).

Individual 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% of adjusted gross income (AGI); previously it was 7.5%.  One carve-out, 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% 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% of your income – whichever is higher – in 2014. That fine increases to $325 or 2% of income in 2015 and $695 or 2.5% 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.

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Courtesy of NASE.org
https://www.nase.org/business-help/self-made-nase-blog/self-made/2013/12/17/happy-new-year!-you-get-to-pay-more-taxes-