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QUEENS CHRONICLE, Thursday, April 3, 2014 Page 30

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How healthcare reform could impact your tax returns Several key tax law changes in the Affordable Care Act have been implemented in 2013 and 2014. The impact of those changes on federal tax returns due April 15, 2014 and 2015 hinge mainly on your household’s adjusted gross income ( AGI ) and health insurance situation. “The impact on this year’s federal tax returns is mainly limited to taxpayers in higher income brackets and those with high unreimbursed medical expenses,” says TaxACT spokesperson Jessi Dolmage. “The health insurance mandate starts to be enforced on tax returns filed in 2015.” Changes for tax returns due April 15 Taxpayers with a modified AGI of $200,000 or more in 2013 ($250,000 if filing jointly, or $125,000 if married filing separately) will pay an additional 3.8 percent tax on investment income, such as interest, dividends, capital gains, rental and royalty income. The 3.8 percent tax is in addition to the tax you already pay on investment income. Your investment income may be reduced by expenses that can be

allocated to your investment income, such as investment interest expenses, advisory and brokerage fees, and rental and royalty expenses. The amount may also be reduced by state and local income taxes that can be allocated to investment income items. Those same taxpayers also started paying an additional 0.9 percent Medicare tax on wages and compensation in excess of $200,000 in 2013. The tax is automatically withheld from employee wages so you’ll simply need to report the amount in Boxes 5 and 6 of your Form W-2 on your tax return. The tax for business owners and the selfemployed will be calculated using figures on Schedule SE. Taxpayers who itemize must now meet a higher floor to deduct unreimbursed medical expenses. The threshold has increased to 10 percent of your AGI. If your 2013 AGI is $50,000, for example, you can only deduct medical expenses that exceed $5,000 ($50,000 X 10 percent = $5,000). If you’re age 65 or older, the threshold remains at 7.5 percent. “You can easily and confidently navigate these changes with free online,

download or mobile tax solutions,” says Dolmage. “The program will guide you through each change and help maximize your credits and deductions.” Health insurance changes for tax returns due next year If you purchase health insurance through a state or federal marketplace, you may qualify for the advanced premium tax credit. The credit will be paid directly to your insurance company in most cases, resulting in lower monthly premium costs. If you prefer to pay your entire premium, you can receive the credit as a refund when filing your federal tax return due April 15, 2014. “TaxACT will reconcile the credit with your income after you enter all of your information,” says Dolmage. “You may receive a larger credit or have to pay back some or all of the credit if your actual income is more or less than the amount you estimated when purchasing insurance.” If you don’t have minimum essential health insurance for three or more consecutive months in 2014, you may pay a penalty on your federal tax return due

Find out about important health insurance changes for tax returns due this PHOTO COURTESY BRANDPOINT year and next. April 2015. The penalt y amount depends on the number of months you’re uninsured, household income and the number of uninsured adults and children in the household. The penalty will be 1 percent of your 2014 income or $95 per person, whichever is higher. The penalty for uninsured dependents under the age of 18 is $47.50 per child, up to $285 total per family.

TaxACT provides health-related tax guidance plus HealthWatch, a detailed analysis of the potential impact of the Affordable Care Act on your taxes and health insurance for 2014. Learn more about tax law changes at irs.gov. A free year-by-year guide and healthcare credit and penalty calculators P can be found at healthcareact.com. — Brandpoint

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Queens Chronicle South Edition 04-03-14  

Queens Chronicle South Edition 04-03-14

Queens Chronicle South Edition 04-03-14  

Queens Chronicle South Edition 04-03-14