As 2013 approaches, the Advi$or thought we would outline what is in store for individuals regarding new ObamaCare taxes that kick in and how they relate to payroll.

Starting Jan 1, 2013, for those individuals who earn $200,000/yr ($250,000 married) the medicare payroll tax will increase.  For the first $200k, the medicare tax will remain at 1.45% 2.9% for self employed. After reaching that threshold, employee’s medicare payroll tax will increase to 2.35% , 3.8% for self employed.

A surtax of 3.8% on investment income will kick in in Jan 2013 for those earning $200,000 ($250,000 household). As a result, capital gains taxes will increase from 15% to 23.8%. Dividend and other unearned income such as interest, annuities, royalties and net rents can be taxed a the new rate of 43.4% as opposed to the 35% current maximum rate.

Currently those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5% of a persons AGI. In 2013 this threshold will increase to 10% of AGI before the deduction is allowed. This new threshold is waived for taxpayers 65+ but only up to 2016.

In 2013, ObamaCare also imposes a cap on FSA’s  limiting them to $2,500.  And it eliminates the tax deduction for employer provided retirement drug coverage in coordination with Medicare Part D.

Obamacare in 2014

The Advi$or also wants to remind you that in 2014, both the individual and the employer mandate tax kick in. On the individual side, starting in 2014, anyone not buying qualifying health insurance must pay an income surtax according to the higher of the following:

2014:  1 Adult-  1%AGI or $95
2 Adults- 1% of AGI or $190
3+ Adults- 1% of AGI  or $285

2015: 1 Adult-  2%AGI or $325
2 Adults- 2% of AGI or $650
3+ Adults- 2% of AGI  or $975

2016: 1 Adult-  2.5%AGI or $695
2 Adults- 2.5% of AGI or $1390
3+ Adults- 2.5% of AGI  or $2085

The employer mandate (currently set to apply to all employers with 50 or more employees) specifies that if an employer does not offer health coverage and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductable tax of $2,000 ea. for all full time employees. If an employee receives coverage through the government exchange, the penalty increases to $3,000. If the employer requires a waiting period of 30 to 60 days to enroll in the company plan, they will be subject to a $400 tax. This increases to $600 if the period is more than 60 days.