As I'm sure you have heard... The Supreme Court has upheld the Affordable Care Act, almost in its entirety and the law's individual mandate did indeed survive - but as a tax.
So, moving forward, here's what we know for sure....
Will I have to provide medical coverage to my employees?
- All individuals, including small business owners must have health insurance by 2014 or pay a penalty
- Businesses with fewer than 25 employees are eligible for a tax break if you cover at least half the cost of health insurance.
- Businesses with less than 10 employees with average salaries less than $25,000 are eligible for the full credit.
- No business is mandated to provide insurance, but in 2014 only small businesses will be exempt from penalties if they don't.
- Businesses with 50+ full time equivalent employees will be penalized $2,000 for each full-time employee in excess of 30 full-time employees if they do not provide insurance. (So the penalty cost starts at the 31st employee)
- You will have to provide "minimum essential" and "affordable" coverage... not just any insurance.
- If your coverage is not affordable, qualifying employees can get subsidized coverage through the tax credit on the state exchanges. You will have to pay the lesser of $3,000 per subsidized full-time employee, or the $2,000-per-employee penalty after the first 30 full-time employees.
What about my taxes?
- There will be a Medicare payroll tax increase. Medicare payroll tax for wages and self-employment earnings in excess of $250,000 ($200,000 for singles) will rise from 2.9 percent to 3.8 percent.
- The law imposes a 3.8 percentage point surtax on "investment income," starting in 2013. Investors in small businesses (limited partners and passive shareholders in Subchapter-S corporations) will face this tax.
- There will be a $2,500 limit on tax-free contributions to flexible spending accounts.
- The threshold for deducting medical and dental expenses rises from 7.5% of your AGI to 10%.
In addition to the tax hikes above, we have the Bush Tax Cuts expected to expire at the end of this year. If these tax cuts expire, we could be in for rough year.
We will keep you posting on the status of the Bush Tax Cuts and anymore tax changes coming your way... If you have any questions or are ready to start planning so you are not hurting at tax time, please contact us.