Close Menu
Finance Care Guide
  • Home
  • About Me
  • Contact Me
  • Content Writing
  • Submit Guest Post
What's Hot
Trade Gold

How to Trade Gold: Understanding the Different Markets and Strategies

May 16, 2025
Proactive Home-Owner

Genius Ways to Save Money as a Homeowner

May 16, 2025
Inherited a Property

Sell It, Rent It, Keep It? What to Do With an Inherited Property

May 16, 2025
Facebook X (Twitter) Instagram
Facebook X (Twitter) Instagram Pinterest
Finance Care GuideFinance Care Guide
Contact Us
  • Home
  • About Me
  • Contact Me
  • Content Writing
  • Submit Guest Post
Finance Care Guide

How ObamaCare Will Affect You and Your Taxes

Personal Finance February 8, 20135 Mins Read
Facebook Twitter Pinterest LinkedIn Tumblr Email
Medicare Tax
Share
Facebook Twitter LinkedIn Pinterest WhatsApp Email

Despite much congressional posturing about trying to repeal the law, The Affordable Care Act, commonly referred to as ObamaCare, is already affecting taxpayers. Not all of the provisions of the law have gone into effect yet, but many kicked in starting January 1, 2013. You have most likely already seen a difference in your paycheck. Although you will not see much of a difference when you file your 2012 tax return, expect even bigger changes in the years to come.

Medicare Tax

Individuals who earn more than $200,000 per year and married couples who earn more than $250,000 per year must now pay an additional .9% on any income earned over those amounts. This raises the current 2.9% Medicare payroll tax to 3.8% on all income the goes beyond the 200k or 250k threshold. Typically, the Medicare tax is split evenly between employers and employees, but those who are self-employed have to pay the full tax themselves. Many people mistakenly believe the higher tax rate coming out of their paychecks is because of Medicare, but it is actually because of a different tax cut that expired in 2013.

Itemized Medical Deductions and Flexible Spending Account Tax Limits

As of 2013, the threshold that determined how much of their medical deductions people could deduct on their taxes jumped to 10% of their adjusted gross income. Previously, this amount was only 7.5% of taxpayers’ adjusted gross income in order to qualify. Another big change this year is that there is now a limit the amount of tax-exempt money that workers can put away for medical expenses. Although, some employers had limits, there was no federal limit until now. The new law caps the amount at $2,500 per year now. Both of these laws will create higher tax burdens for those with ongoing health problems.

Going Forward

Starting January 1, 2014, all United States citizens and legal residents must have health insurance or they will have to pay a tax penalty. The penalty, starting in 2014, is $95 or 1% of your household income, whichever is higher. After that, it will continue to increase through 2016 until it reaches $695 or 2.5% of household income. Future increases will go up by cost-of-living. The tax penalties will be raised gradually between 2014 – 2016.

The federal government has also created a Health Insurance Marketplace website where those who aren’t sure where to shop for individual coverage can look for coverage and an explanation of benefits.

Loopholes

There are a few loopholes to avoid paying the penalty, but they only apply to a small percentage of people. You can go up to three months without health insurance before you have to pay the penalty. If your income is so low that you do not file taxes or the lowest cost plan you can find is more than 8% of your income, then you will not have to pay the penalty. Prisoners in jail and Native Americans do not have to purchase health insurance.

How to Avoid the Tax Penalty

If you do not have, or cannot afford insurance through your employer, you may be eligible to apply for Medicaid. Additionally, if you are unemployed, but do not receive unemployment compensation you can apply for Medicaid as well; however, you cannot apply for Medicaid if you receive unemployment compensation. Married people may be eligible to go on their spouse’s medical plan. Many states are setting up State-Based Exchanges to help citizens find health insurance that they can afford. Can your state’s division of Health and Social Services to find out if your state is setting up an exchange. In cases where states opt out of setting up an exchange, the United States government will set-up a Federal Exchange for people to compare insurance plans.

Financing Your Healthcare Insurance

Although the government claims the exchanges will offer affordable health insurance so that Americans do not have to pay the tax penalty, the specifics of how this will work are still a bit sketchy. If you do not have enough money saved up to purchase a qualified health plan, you can consider applying for financial assistance through websites like credit loan personal loans, prosper.com or Lending Club; although those options may just add to your debt levels if you can’t pay them off right away. Alternatively, if you have good credit, you might be able to get a lower-rate personal loan from a bank like Wells Fargo.

The Affordable Care Act is one of the most sweeping healthcare reforms in United States’ history. With so many millions of Americans affected, ObamaCare has quite a few supporters and detractors. However, the fact of the matter is that President Barack Obama signed the bill into law in 2010 and changes are already taking place. The best thing you can do to stay informed of any changes that may happen and comply with the mandatory insurance requirement so that you can avoid paying a tax penalty.

Dona Collins is a graphic designer and blogger with a strong background in the finance and insurance industries. When in doubt, talk to your accountant or financial adviser about how the new healthcare laws will impact your finances.

Previous Article5 Best Financial Education Websites Resources
Next Article Financial Benefits of Good Drivers

Related Posts

Inherited a Property

Sell It, Rent It, Keep It? What to Do With an Inherited Property

Achieving Financial Independence

5 Life-Changing Insights from Mr. Money Mustache on Achieving Financial Independence

Mortgage Appraisal Survival Guide: What Every Buyer Needs to Know

Don't Miss
Trade Gold

How to Trade Gold: Understanding the Different Markets and Strategies

By Peter ChristopherMay 16, 2025

Gold has long held its place as a symbol of wealth and stability. From ancient…

Proactive Home-Owner

Genius Ways to Save Money as a Homeowner

May 16, 2025
Inherited a Property

Sell It, Rent It, Keep It? What to Do With an Inherited Property

May 16, 2025
Stay In Touch
  • Facebook
  • Twitter
  • Pinterest
  • Instagram
  • YouTube
  • Vimeo
Latest Posts
Trade Gold

How to Trade Gold: Understanding the Different Markets and Strategies

May 16, 2025
Proactive Home-Owner

Genius Ways to Save Money as a Homeowner

May 16, 2025
Inherited a Property

Sell It, Rent It, Keep It? What to Do With an Inherited Property

May 16, 2025
Digital-Only Savings Accounts

How Safe Are Digital-Only Savings Accounts?

May 8, 2025
About Us

We are one of the best personal finance platforms in the U.S. and writing focusing on the latest moves in financial markets, key finance issues, strategies, latest technologies, and emerging trends in investment, banking, personal finance, mortgage, and debt counseling.
We're accepting new partnerships right now.

Email Us: peter@financecareguide.com

Facebook X (Twitter) Pinterest YouTube WhatsApp
Latest Posts
Trade Gold

How to Trade Gold: Understanding the Different Markets and Strategies

Proactive Home-Owner

Genius Ways to Save Money as a Homeowner

Inherited a Property

Sell It, Rent It, Keep It? What to Do With an Inherited Property

Trending Today
Brand New Business

Legal Considerations You Need to Keep in Mind While Starting a Brand New Business

Shot term lending

How to Use Short-term Lending Responsibly

cryptocurrency

How do Crypto Consulting Firms in Dubai Assist in Maintaining the Regulatory Aspect of the Region

Type above and press Enter to search. Press Esc to cancel.