Now that Barack Obama has been reelected, Obamacare will become reality.This means that a lot more people in the United States will have health insurance.
If the program works as it is supposed to, it also means that the growth of healthcare spending overall will eventually slow.
Both of those are good.
But, in the near term, Obamacare also means a lot of people will be paying more taxes and higher insurance premiums.
(You didn’t think Obamacare was free, did you?)
Here are some of the new taxes you’re going to have to pay to pay for Obamacare:
- A 3.8% surtax on “investment income” when your adjusted gross income is more than $200,000 ($250,000 for joint-filers). What is “investment income?” Dividends, interest, rent, capital gains, annuities, house sales, partnerships, etc. Thanks to the expiration of the Bush tax cuts, taxes on dividends will rise rise from 15% to a shocking 43.8% on January 1st, unless Congress cuts a deal with respect to the fiscal cliff. (WSJ)
- A 0.9% surtax on Medicare taxes for those making $200,000 or more ($250,000 joint). You already pay Medicare tax of 1.45%, and your employer pays another 1.45% for you (unless you’re self-employed, in which case you pay the whole 2.9% yourself). Next year, your Medicare bill will be 2.35%. (WSJ)
- Flexible Spending Account contributions will be capped at $2,500. Currently, there is no tax-related limit on how much you can set aside pre-tax to pay for medical expenses. Next year, there will be. If you have been socking away, say, $10,000 in your FSA to pay medical bills, you’ll have to cut that to $2,500. (ATR.org)
- The itemized-deduction hurdle for medical expenses is going up to 10% of adjusted gross income. Right now, any medical expenses over 7.5% of AGI are deductible. Next year, that hurdle will be 10%. (ATR.org)
- The penalty on non-medical withdrawals from Healthcare Savings Accounts is now 20% instead of 10%. That’s twice the penalty that applies to annuities, IRAs, and other tax-free vehicles. (ATR.org)
- A tax of 10% on indoor tanning services. This has been in place for two years, since the summer of 2010. (ATR.org)
- A 40% tax on “Cadillac Health Care Plans” starting in 2018.Those whose employers pay for all or most of comprehensive healthcare plans (costing $10,200 for an individual or $27,500 for families) will have to pay a 40% tax on the amount their employer pays. The 2018 start date is said to have been a gift to unions, which often have comprehensive plans. (ATR.org)
- A”Medicine Cabinet Tax” that eliminates the ability to pay for over-the-counter medicines from a pre-tax Flexible Spending Account. This started in January 2011. (ATR.org)
- A “penalty” tax for those who don’t buy health insurance. This will phase in from 2014-2016. It will range from $695 per person to about $4,700 per person, depending on your income. (More details here.)
- A tax on medical devices costing more than $100. Starting in 2013, medical device manufacturers will have to pay a 2.3% excise tax on medical equipment. This is expected to raise the cost of medical procedures. (Breitbart.com)
So those are some of the new taxes you’ll be paying that will help pay for Obamacare.
Any big ones I’ve missed?
Note that these taxes are both “progressive” (aimed at rich people) and “regressive” (aimed at the middle class and poor people). The big ones–the 3.8% investment income hike and the Medicare tax increase–only hit you if you’re making more than $200,000 a year. The rest hit you no matter how much you’re making.
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