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LEGISLATIVE NEWS

Categories Tax Tips (Fed)

 

President Obama signed the Patient Protection and Affordable Care Act (HR 3590), into law on Tuesday at a White House ceremony.  Hot on its heels, an accompanying bill (HR 4872, the Health Care and Education Reconciliation Act) is making material changes to the tax law elements of the new health care law that yesterday passed both chambers.

So, what do we know for certain other than the new health care law is controversial and includes significant tax measures? Well, a ten percent excise tax on indoor tanning services is slated to take effect on July 1, 2010 and a provision making the adoption tax credit refundable, increasing the qualifying expenses threshold, and extending the credit through 2011 also takes effect this year. Other changes coming down the pike later include FSA changes, a requirement for businesses to report on Form W-2 the value of health care benefits provided, a requirement for information reporting business-to-business payments, and a 0.9 percent surtax on top of the existing 1.45 percent hospital insurance (HI) tax payroll tax paid by higher earning individuals.

And how does the reconciliation bill change the tax law? In a variety of ways, but one of the most significant ones is a new 3.8 percent Medicare tax on net investment income of those earning over $200k (single) or $250k (MFJ). Not surprisingly, “net investment income” casts a rather wide net and includes rents, royalties, dividends, interest, and passive activity income.

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