New Taxes, Hikes, Breaks, Credits and Other Changes.
Here’s a full list of ObamaCare Taxes. The 21 new ObamaCare tax hikes and breaks impact us all, but which ObamaCare taxes will you actually pay? Find out how the tax related provisions in the Affordable Care Act (ObamaCare) will affect you, your family, your business, and your tax returns in 2013 and beyond.
The Bottom Line on the ObamaCare Tax Plan
and the health care industry, while tax credits primarily affect low-to-middle income Americans and small businesses.
Why Does Obamacare Create New Taxes?
ObamaCare includes many new benefits, rights, and protections including the requirement for health insurers to cover people with pre-existing conditions. It also expands access to affordable health insurance to almost 50 million low-to-middle income men, women, and children across the country by offering reduced premiums via tax credits and expanding Medicaid and CHIP. Expanding the quality, affordability and availability of health insurance (along with other aspects of the law) come at a high cost. Assuming all tax provisions remain in place, the revenue generated from these new taxes help to cover the costs of the program and reduces the deficit. Learn more about the new benefits, rights, protections offered by the Affordable Care Act.
A Quick Overview of Key Taxes in the Affordable Care Act
Before we get to the full list of taxes here is a quick overview of the key tax related provisions that may affect those without insurance, those who plan to go without insurance, and those who are struggling to afford insurance now.
Individual Mandate (new tax): Americans who can afford to must obtain minimum essential health coverage for 2014, get an exemption or pay a per month fee.
Employer Mandate (new tax): Come 2015 large employers must insure full time employees or pay a per employee fee. Over half of Americans get their insurance through work and the largest group of uninsured is currently the working poor.
Advanced Premium Tax Credits (tax break): Low-to-middle income Americans are eligible for tax credits which reduce the upfront cost of premiums on health insurance purchased through their State’s “Health Insurance Marketplace”.
Small Business Tax Credits (tax break): Small businesses may be eligible for tax credits of up to 50% of their cost of employee premiums through the Small Business Health Options Program.
Taking all the tax provisions in the ACA into account ObamaCare technically provides the greatest middle class tax cut to healthcare in history.
Full List of All Taxes in ObamaCare / All Taxes in the Affordable Care Act
The following list of new ObamaCare taxes collectively raise over $800 billion by 2022. Here is a complete list of new fees and taxes contained within ObamaCare:
ObamaCare Taxes That Most Likely Won’t Directly Affect the Average American
• 2.3% Tax on Medical Device Manufacturers 2014
• 10% Tax on Indoor Tanning Services 2014
• Blue Cross/Blue Shield Tax Hike
• Excise Tax on Charitable Hospitals which fail to comply with the requirements of ObamaCare
• Tax on Brand Name Drugs
• Tax on Health Insurers
• $500,000 Annual Executive Compensation Limit for Health Insurance Executives
• Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D
• Employer Mandate on business with over 50 full-time equivalent employees to provide health insurance to full-time employees. $2000 per employee $3000 if employee uses tax credits to buy insurance on the exchange (marketplace). (pushed back to 2015)
• Medicare Tax on Investment Income 3.8% over $200k/$250k
• Medicare Part A Tax increase of .9% over $200k/$250k
• Employer Reporting of Insurance on W-2 (not a tax)
• Corporate 1099-MISC Information Reporting (repealed)
• Codification of the “economic substance doctrine” (not a tax)
ObamaCare Taxes That (may) Directly Affect the Average American
• 40% Excise Tax “Cadillac” on high-end Premium Health Insurance Plans 2018
• An annual $63 fee levied by ObamaCare on all plans (decreased each year until 2017 when pre-existing conditions are eliminated) to help pay for insurance companies covering the costs of high-risk pools.
• Medicine Cabinet Tax
Over the counter medicines no longer qualified as medical expenses for flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), health savings accounts (HSAs), and Archer Medical Saving accounts (MSAs).
• Additional Tax on HSA/MSA Distributions
Health savings account or an Archer medical savings account, penalties for spending money on non-qualified medical expenses. 10% to 20% in the case of a HSA and from 15% to 20% in the case of a MSA.
• Flexible Spending Account Cap 2013
Contributions to FSAs are reduced to $2,500 from $5,000.
Medical Deduction Threshold tax increase 2013
Threshold to deduct medical expenses as an itemized deduction increases to 10% from 7.5%.
• Individual Mandate (the tax for not purchasing insurance if you can afford it) 2014
Starting in 2014, anyone not buying “qualifying” health insurance must pay an income tax surtax at a rate of 1% or $95 in 2014 to 2.5% in 2016 on profitable income above the tax threshold. The total penalty amount cannot exceed the national average of the annual premiums of a “bronze level” health insurance plan on ObamaCare exchanges.
• Premium Tax Credits for Small Businesses 2014 (not a tax)
• Advanced Premium Tax Credits for Individuals and Families 2014 (not a tax)
• Medical Loss Ratio (MRL): Premium rebates (not a tax)
The link below provides a full list of ObamaCare Taxes by the IRS.
For a full list of taxes provisions from the IRS
Or see the latest publication by the joint tax committee on the Affordable Care Act.
Who Does ObamaCare Tax?
Let’s take a look at how ObamaCare’s taxes affect certain income groups.
ObamaCare Taxes for High Earners and Large Businesses
Most of the new taxes are on high-earners (individuals making over $200,000 and families making over $250,000), large businesses (over 50 full-time equivalent employees making over $250,000), and industries that profit from healthcare. Essentially those who will see gains under ObamaCare are required to put money back in the program via taxes.
FACT: Tax increases generally affect single filers with an adjusted gross income (AGI) above $200,000 and married couples filing jointly above $250,000. Some of the tax increases don’t kick in until single AGI hits $400,000 and married filing jointly AGI hits $450,000.
ObamaCare Taxes for the Average American With Health insurance
For most of the 85% of Americans with health insurance, making less than $250,000, most of the new taxes won’t mean much of anything although certain taxes below will affect specific individuals and families.
ObamaCare Taxes for the Average American Without Health insurance
The 15% of Americans without health insurance will be required to obtain health insurance (Individual Mandate) or will face a “tax penalty”.
The good news is that many uninsured will be exempt from the Individual mandate due to income, offered cost assistance through the marketplace including Tax Credits (also available to small businesses), qualify for Medicaid, or will get insurance through work (the Employer Mandate requires large employers to insure full-time employees by 2015). Adults who are under 26 will be able to stay on their parents plan as well, this will help to limit the number of young people who will pay the fee. Both the employer and individual mandates are part of our “shared responsibility” to expand the quality and affordability of health insurance in the United States as a trade for our new benefits, rights and protections.
ObamaCare Taxes for Small Businesses
Small businesses with less than 25 full-time equivalent employees will have access to tax credits to reduce premium costs of group plans.
ObamaCare Taxes for Specific Groups With Health Insurance
Here are a few changes that my affect specific groups of Americans with health insurance:
• Other tax provisions such as changes medical deduction thresholds, HSAs, MSAs, and FSAs may impact some Americans by limiting tax deductions.
• The Medical Loss Ratio (MLR or 80/20 rule) will mean that some Americans may get rebates if health insurance companies spend on non-healthcare related expenses.
• Tax provisions like the 10% tanning bed tax, taxes on drug companies, taxes on medical devices and taxes on health insurance companies selling insurance on and off the exchange may affect the amount of money we pay for some health care related goods and services, but will not have a significant impact on our daily lives.
• The employer mandate has caused some companies to cut down full-time workers to part-time to avoid providing benefits, however major employers like Disney and Walmart have actually increased their full-time workforce in response to the looming 2015 deadline.
• Overall the benefits tend to outweigh the costs for the average American as even those who pay a little more, get a lot more in return due to the increased quality of their health insurance.
Will I pay More Taxes and High Premiums Because of ObamaCare?
As mentioned above premium rates and the taxes you will have to pay are primarily based on income. Aside from income premium prices are based on which plan you choose, family size, age, smoking status and geography. Subsidies reduce the overall rate of your premiums (however smoking is calculated after subsidies). Come 2018 there will be a 40% excise tax on high end health insurance plans.
Aside from the tax provisions that require Americans to obtain insurance and subsidize it’s costs, ObamaCare also includes a few tax related provisions that work as consumer protections including requirements for better reporting and the Medical Loss Ratio.
ObamaCare Tax Rebates
Some consumers in both individual and group markets will see tax rebates due to ObamaCare’s Medical Loss Ratio (MLR). Health insurance companies will have to provide rebates to consumers if they spend less than 80 to 85% of premium dollars on medical care.
Medical Loss Ratio (MLR)
The Medical Loss Ratio (MLR) means that Insurance companies are now required to spend at least 80% of premium dollars (85% in large group markets) on medical care and quality improvement activities. Insurance companies that are not meeting this standard will be required to provide rebates to their consumers. The MLR isn’t a tax, but it does have implications in regards to filing taxes and rebates can be given in the form of reduced premiums. See our page on ObamaCare Health Insurance Regulations for more details.
ObamaCare Income Tax Penalty For Not Having Insurance “Individual Mandate”
Starting in 2014, most people will have to have insurance or pay a “penalty deducted from your taxable income”. For individuals, penalty starts at $95 a year, or up to 1% of income, whichever is greater, and rise to $695, or 2.5% of income, by 2016.
For families the tax will be $2,085 or 2.5% percent of household income, whichever is greater. The requirement can be waived for several reasons, including financial hardship or religious beliefs. If the tax would exceed 8% of your income you are exempt, also some religious groups are exempt. That tax cannot exceed the cost of a “bronze plan” bought on the exchange.
Many individuals who are exempt from the mandate to buy insurance will still be eligible for free or low-cost insurance through the health insurance marketplace.
While some states, including Alabama, Wyoming and Montana, have passed laws to block the requirement to carry health insurance, those provisions do not override federal law. Get more information on the ObamaCare Individual Mandate.
The Individual Mandate is officially called the “individual shared responsibility provision”.
What Are ObamaCare Tax Credits?: Advanced Premium Tax Credits
Premium tax credits are a form of cost assistance that reduce premium costs for coverage purchased on your State’s “health insurance marketplace” for individuals, families, and small businesses.
Advanced Premium Tax Credits for Individuals and Families
Individuals and families will have access to Advanced premium tax credits on the marketplace. Tax Credits are deducted from your premium cost by your health insurance provider and are adjusted on your Modified Adjusted Gross Income (MAGI). You can choose how much advance credit payments to apply to your premiums each month, up to a maximum amount. If the amount of advance credit payments you get for the year is less than the tax credit you’re due, you’ll get the difference as a refundable credit when you file your federal income tax return. If your advance payments for the year are more than the amount of your credit, you must repay the excess advance payments with your tax return.
Aside from premium tax credits individuals and families can also get lower cost sharing on out-of-pocket expenses like coinsurance, copays, deductibles and out-of-pocket maximums through the marketplace.
Eligibility for Tax Credits
In general, you may be eligible for the credit if you meet all of the following:
•buy health insurance through the Marketplace;
•are ineligible for coverage through an employer or government plan;
•are within certain income limits;
•file a joint return, if married; and
•cannot be claimed as a dependent by another person.
If you are eligible for the credit, you can choose to:
•Get It Now: have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014; or
•Get It Later: wait to get all of the credit when you file your 2014 tax return in 2015.
How Will Advanced Premium Tax Credits Affect My Health Insurance Costs?
Under the Affordable Care Act health insurance that costs less than 8% of your MAGI is considered affordable. Although the law doesn’t guarantee lower costs, premium tax credits help to ensure that more Americans will have access to affordable insurance.
s a rule of thumb most Americans will pay between 1.5% and 9.5% on their Modified Adjusted Gross Income (MAGI) when using tax credits to buy a basic Silver Plan on the marketplace.
If the lowest-priced coverage available to you would cost more than 8% of your household income are exempt from the individual mandate.
The amount you pay is on a sliding scale based on your income. Use the chart below to get an idea of what you and your family may pay for insurance purchased through the Health Insurance Marketplace. Make sure to check out Obamacare Subsidies for more detailed information on Premium Tax Credits.
The 2013 Federal Poverty Level Guidelines below are used to Determine if your percentage of the poverty level for both taxes and cost-assistance.
This following table is an example of how premium tax credits work. Please note that the numbers below are purely for example and don’t reflect your personal rates.
Health Insurance Premiums and Cost Sharing under PPACA for Average Family of 4 For “Silver Plan”
Income % of federal poverty level
Premium Cap as a Share of Income
Income $ (family of 4)
Max Annual Out-of-Pocket Premium
Additional Cost-Sharing Subsidy
133% 3% of income $31,900 $992 $10,345 $5,040
150% 4% of income $33,075 $1,323 $9,918 $5,040
200% 6.3% of income $44,100 $2,778 $8,366 $4,000
250% 8.05% of income $55,125 $4,438 $6,597 $1,930
300% 9.5% of income $66,150 $6,284 $4,628 $1,480
350% 9.5% of income $77,175 $7,332 $3,512 $1,480
400% 9.5% of income $88,200 $8,379 $2,395 $1,480
In 2016, the FPL is projected to equal about $11,800 for a single person and about $24,000 for family of four. Use the Kaiser ObamaCare Cost Calculator for more information. DHHS and CBO estimate the average annual premium cost in 2014 to be $11,328 for family of 4 without the reform. Source: Wikipedia
ObamaCare Employer / Employee Taxes
ObamaCare’s taxes mean large employers will have to provide health insurance to their employees and will see a raised Medicare part A tax, small businesses may be eligible for tax breaks.
Medicare part A Tax Hike for Employers and Employees
The Medicare part A tax is paid by both employees and employers who earn over a certain amount. ObamaCare’s Medicare tax hike is a .9% increase (from 2.9% to 3.8%) on the current total Medicare part A tax. This tax is split between the employer and employee meaning that they will both see a .45% raise. Small businesses making under $250,000 are exempt from the tax. Employees making less than $200,000 as an individual or ($250,000) as a family are also exempt. Employers must withhold and report an additional 0.9 percent total on employee wages or compensation that exceed $200,000.
Tax Penalty for Not Providing Full-time Workers with Health Insurance the “Employer Mandate”
Employers with over 50 full-time equivalent employees must either insure their full-time employees or pay a penalty or “employer shared responsibility fee”. The penalty is $2000 per employee. If however, at least one full-time employee receives a premium tax credit because coverage is either unaffordable or does not cover 60 percent of total costs, the employer must pay the lesser of $3,000 for each of those employees receiving a credit or $750 for each of their full-time employees total.
Employers with under 25 full time employees, whose average income doesn’t exceed $50,000, can apply for tax credits of up to 50% for insuring their employees.
Tax Credits for Small Businesses
Small businesses with under 25 full-time equivalent employees with average annual wages of less than $50,000 can apply for tax breaks of up to 50% of their share of employee premium costs via Obamacare’s Small Business Health Options Program (accessible through your State’s Health Insurance Marketplace). The credit can be as much as 50% of employer premiums (35% for not-for-profits in 2014). The credit is only available if the employer is paying at least 50% of the total premiums.
Small Business Health Options Program
Employers with 50 or fewer employees, you can purchase affordable insurance through the Small Business Health Options Program (SHOP) even if they don’t qualify for tax credits.
Along with the new law there are new requirements for reporting.
•Effective for calendar year 2015, you must file an annual return reporting whether and what health insurance you offered your employees. This rule is optional for 2014. Learn more.
•Effective for calendar year 2015, if you provide self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover. This rule is optional for 2014. Learn more.
•Beginning Jan. 1, 2013, you must withhold and report an additional 0.9 percent on employee wages or compensation that exceed $200,000. Learn more.
•You may be required to report the value of the health insurance coverage you provided to each employee on his or her Form W-2.
Other ObamaCare Taxes on Big Business
Aside from having to adhere to the “employer mandate” ObamaCare also imposes taxes and fees that are unique to big business. ObamaCare taxes some medical device manufactures, drug companies and health insurance companies. Beginning in 2013, medical device manufacturers and importers must pay a 2.3% tax on the sale of a taxable medical device. This raises $29 billion over a 10 years. However, many states are asking to delay the medical device excise tax to protect jobs in states that produce the devices. An annual fee for health insurers is expected to raise more than $100 billion over 10 years, while a fee for brand name drugs will bring in another $34 billion.
•Employers that have employees who earn more than $200,000 will have to look at the potential for additional Medicare withholding due to the Medicare part A tax.
•Employers that issued 250 or more W-2 forms in 2012 must report the cost of employer-sponsored health coverage for 2013 on the 2013 W-2 forms.
What Increases Do the ObamaCare Taxes Include for The $200k/$250k Earners?
ObamaCare Medicare Part A Payroll Tax
Starting in 2013, individuals with earnings above $200,000 and married couples making more than $250,000 will see an increase in the Medicare part A payroll tax. It’s an increase of 2.35%, up from the current 1.45% ( a .9% Medicare part A payroll tax hike), on adjusted income over the threshold.
ObamaCare Unearned Income Tax
This group will also pay a 3.8% unearned income (capital gains) tax on interest, dividends, annuities, royalties, rents, and gains on the sale of investments over the threshold.
Taxable income under the $200,000 for individuals and $250,000 threshold for families is subject to the same benefits and tax cuts as those who make under the threshold.
ObamaCare Home Sales Tax / ObamaCare Real Estate Tax Increase
ObamaCare increases taxes on unearned income by 3.8% and this can add additional taxes to the sales of some homes, but many limitations apply which means it won’t affect most sellers. The 3.8% capital gains tax typically doesn’t apply to your primary residence. It also doesn’t usually apply to homes you have owned for over 5 years or on profits of less than $250,000 for individuals and $500,000 for couples due to a capital gains tax exclusion rule for sales of a primary home.
In short the ObamaCare home sales tax isn’t something that most of us will pay, it is a tax is aimed at those selling non-primary residences in short term periods for profit and not at the average American buying and selling their primary residence.
ObamaCare Medical Expense Deductions
ObamaCare increases the medical expense deduction threshold. Unreimbursed medical expense deductions will now be available only for those medical expenses in excess of 10% of AGI, which has been raised from 7.5%. There is a temporary exemption for individuals ages 65 and older and their spouses from 2013 through 2016.
ObamaCare “Cadillac” Tax
Starting in 2018, the new health care law imposes a 40% excise tax on the portion of most employer-sponsored health coverage (this excludes dental and vision) that exceed $10,200 a year and $27,500 for families. The tax has been dubbed a “Cadillac” tax because it hits only high-end “gold”, “platinum” and high-end health care plans not purchased on the exchange. The tax raises over $150 billion over the next 10 years.
New ObamaCare Taxes Summary
Going through the new ObamaCare taxes line by line is, in itself, taxing. The bottom line is that a majority of Americans will find themselves paying less for better healthcare, while higher-earners will pay tax rates closer to what they did in the Clinton years. ObamaCare pays for most of itself via the above taxes, reforms to Medicare, and health care as a whole, as well as cutting out billions in wasteful spending.
ObamaCare Taxes Moving Forward into 2014
We hope this helps you to understand the new ObamaCare taxes and how they work. Many of the ObamaCare’s taxes won’t be fully implemented until 2022, but most will be in effect by 2014. ObamaCare helps all Americans get access to quality affordable healthcare, and new benefits, rights and protections. Make sure to look out for ObamaCare tax breaks, credits, subsidies and breaks on up front costs moving forward into 2014. As we learn more we will update our full ObamaCare tax list.