Now that both pieces of health care legislation have been passed into law, we know that roughly $438 billion of tax changes will occur over the next eight years. More specifically, the timeframe looks like this:

2010

• Ten percent excise tax on indoor tanning services begins July 1.
• Adoption tax credit is made refundable, effective Jan. 1, 2010; the thresholds for qualifying expenses are increased; and the adoption credit is extended through 2011.
• §833 is modified to reduce the value of deductions from revenues to put additional pressure on Blue Cross and Blue Shield organizations to increase their share of spending on medical reimbursements or lose special tax breaks granted to them in the 1986 tax reform.
• Forgiven student debts for medical professionals that have participated in a program to bring medical care to underserved areas are excluded from taxable income beginning in the 2009 tax year.

2011

• Employers are no longer allowed to deduct from their taxes the value of benefits bought for retirees with government subsidies in order to provide retiree prescription drug coverage under Medicare Part D.
• Businesses must begin reporting the value of health care benefits on employees’ W-2 statements.
• Money in flexible spending arrangements, health savings accounts, and other health reimbursement arrangements cannot be used for over-the-counter medicines unless they are prescribed by a doctor.
• The penalty for using health savings account funds for non-qualified uses will rise to 20 percent from 10 percent.

2012

• New information reporting is required for businesses making payments to corporations in excess of $600 over the course of a calendar year.

2013

• A new 0.9 percent surtax will be tacked onto the 1.45 percent Hospital Insurance (HI) payroll taxes paid by individuals earning more than $200,000 per year or joint filers earning more than $250,000 per year. The thresholds are not indexed for inflation.
• A 3.8 percent tax will be imposed on unearned income of individuals earning more than $200,000 per year ($250,000 for joint filers).
• The threshold for claiming medical expense deductions rises from 7.5 percent of adjusted gross income to 10 percent. The threshold for deductions will remain at 7.5 percent of income for individuals 65 or older until 2016.
• Contributions to health care flexible spending arrangements will be limited to $2,500 as of Jan. 1, 2013. The cap would be indexed to consumer price inflation beginning in 2014.

2018

• A 40 percent excise tax on high-cost (aka “Cadillac”) health insurance plans goes into effect. The tax, paid by insurers or self-insured firms, is on the amount in excess of $10,200 for individuals and $27,500 for families.

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