The Health Care Laws Will Affect 2013 Taxes

As you wrap up your 2012 federal tax return and begin to assess 2013 in light of new rules, it’s time to remember some older ones: the health care laws enacted in 2010. Here are three provisions from those laws that start this year.

  • Additional Medicare tax. You’ll pay this 0.9% tax on wages, compensation, and self-employment earnings when that income exceeds $250,000 and you’re married filing jointly ($200,000 when you’re single).  Regardless of your income or filing status, the additional tax is withheld from your wages once your employer pays you $200,000. You’ll calculate the amount you actually owe on your 2013 federal income tax return.
  • Tax on net investment income. This 3.8% tax applies to 2013 net income from sources such as capital gains, dividends, interest, annuities, and rents when your modified adjusted gross income exceeds $250,000 (for married filing jointly). If you’re single, the tax applies when your MAGI exceeds $200,000.
  • Increased threshold for itemized medical deductions. When you’re under age 65, your unreimbursed medical expenses must be more than 10% of your adjusted gross income to claim an itemized deduction.

Other provisions in the health care laws become effective in future years, including subsidies and tax credits to help with the cost of purchasing a health insurance policy. Eligibility for these benefits depends on modified adjusted gross income, which is based initially on your 2012 income tax return.

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