Tax Implications of the Affordable Care Act (Part II)

In Part I, we examined how the Affordable Care Act will impact the tax filings of individuals. There are also some important taxes and mandates on businesses that are worth noting.

Employer Mandate: Starting in 2015 (delayed from its original implementation year of 2014), employers with 50 or more employees will be subject to a tax of $2000 for any employee that receives a premium tax credit resulting from the ACA guidelines regarding the minimum essential coverage required. In addition, if said employees obtain their actual health coverage through the government exchange, the employer fine goes up to $3000. In essence, what this means is employers must provide health insurance that meets the minimum ACA requirements for all full time employees or be subject to the aforementioned fines. Under the ACA, full time is defined as 30 hours per week or higher.

Barack Obama signing the Patient Protection an...
Barack Obama signing the Patient Protection and Affordable Care Act at the White House

Excise Tax on Medical Device Manufacturers: Effective in 2013, medical device manufacturers, producers, or importers are subject to an excise tax on the sale of certain devices of 2.3%. During the past year, there has been bipartisan support in both the U.S. Senate and House of Representatives to do away with this tax, but thus far it remains in effect.

Elimination of the Employer Medicare Part D Deduction: As of 2013, employers are no longer able to take a tax deduction for providing prescription drug coverage in coordination with Medicare Part D.

Indoor Tanning Services Tax: In 2010, a 10% tax was imposed on the cost of indoor tanning services.

Comprehensive Health Insurance Policy Tax: Starting in 2018, a 40% excise tax is set to take effect on so-called “Cadillac” health insurance policies. These are the top-of-the-line health plans with comprehensive coverage, low to no deductibles, and low co-pays. There has been quite a bit of push back from unions who commonly negotiate these plans for their members, and it is quite possible that this tax will be delayed and/or eliminated before its implementation date.

There are several other smaller mandates under the ACA that affect certain groups such as health insurance companies and hospitals. There are also tax advantages in the form of premium credits and expanded qualification coverage under Medicaid, depending on your income level. For more details on how the ACA may affect your tax situation, speak to your accountant.

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