Health Care Law Upheld – 2013 Tax Provisions

With the Supreme Court (6/28/12) upholding the Affordable Care Act, you should continue preparing for the following provisions that become effective in 2013: (1) employer-provided health Flexible Spending Arrangements (FSAs) will be limited to $2,500 per year, (2) the hospital insurance portion of the FICA tax will be increased from 1.45% to 2.35% for wages over $200,000 ($250,000 if MFJ (married filing joint); $125,000 if MFS), (3) medical expenses will be deductible as itemized deductions only to the extent they exceed 10% of AGI (7.5% threshold will still apply to taxpayers who turn 65 before the end of the tax year), (4) taxpayers with modified AGI over $200,000 ($250,000 if MFJ; $125,000 if MFS) will be subject to a 3.8% surtax on net investment income, and (5) employers who provide qualified prescription drug coverage for Medicare Part D eligible retirees, which is subsidized by the Department of Health and Human Services, will have to reduce their deduction for the coverage by the amount of the excludable subsidy.