by Kathryn Simpson
Implementation of the Patient Protection and Affordable Health Care Act (PPAHCA) continues. Effective January 1, 2013, there are several financial and revenue raising provisions that become effective that may affect you, personally and as an employer. These include:
1. Itemized Deductions for Medical Expenses Threshold
The PPAHCA increases the threshold for itemized deductions for unreimbursed medical expenses from 7.5% of adjusted gross income to 10% of adjusted gross income. This provision waives the increase for individuals age 65 and older for tax years 2013 through 2016.
2. Flexible Spending Accounts
Limits are imposed on the amount of contributions a person may make to a flexible spending account for medical expenses. The 2013 amount is $2,500 per year. The amount will be increased annually by the cost of living adjustment.
3. Medicare Tax Increase
The tax rate on wages for FICA Medicare is increased from 1.45% to 2.35% on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly. There is no increase in the employer contribution but the employer is responsible for collecting the employee’s share. Also, a 3.8% assessment on unearned income for higher-income taxpayers is imposed.
4. Tax on Medical Devices
The PPAHCA imposes an excise tax of 2.3% on the sale of any taxable medical device. The term “taxable medical device” does not include eyeglasses, contact lenses, hearing aids or any other medical device that is purchased by the general public at retail for individual use, according to the IRS proposed rules.
5. Closing the Medicare Drug Coverage Gap
The Act begins phasing-in federal subsidies for brand-name prescriptions filled in the Medicare Part D coverage gap (reducing coinsurance from 100% in 2010 to 25% in 2020, in addition to the 50% manufacturer brand-name discount).
For more information, call Mette, Evans & Woodside at 717-232-5000.