Taxpayers might no longer need to be concerned with the 3.8% Net Investment Income Tax, among other taxes established under the Affordable Care Act (“ACA”). On March 6, 2017, the House Ways and Means Republicans unveiled the American Health Care Act which would repeal several provisions of the ACA including the Net Investment Income Tax that targeted capital gains, dividends and other passive income.1
The individual mandate penalty for failing to maintain minimum healthcare coverage and the employer mandate penalty would also be repealed. While the repeal of the individual and employer mandate penalties would apply retroactively to months beginning after December 31, 2015, the repeal of the other taxes would not take effect until 2018. The 2019 tax season brings several changes that affects seniors and family caregivers filing federal returns for tax year 2018. Now that tax time is here, family caregivers and seniors have questions about caregiver and long-term care deductions, medical expenses and tax credits.
Other taxes listed for repeal include the 0.9% Medicare surcharge on high-income earners and the 2.3% medical device excise tax. This proposed legislation may have a long road ahead to become law with possible changes along the way.
Although the proposed legislation would repeal many of the ACA taxes, the bill unexpectedly retains some of the revenue raisers put in place by the ACA, including the “Cadillac” excise tax. Rather than repealing the 40% “Cadillac” excise tax on high-cost healthcare plans which was set to begin in 2020, the tax would instead apply beginning in 2025.
The American Health Care Act also proposes the use of refundable tax credits for individuals without government-provided or employer-provided health insurance to purchase coverage for health services. The credit would be adjusted for age, starting at $2,000 for individuals under the age of 30 with incremental increases thereafter, capped at $4,000 for individuals age 60 or older. For families, the credit would be capped at $14,000 per household. Phase-outs would apply to the credit for individuals making more than $75,000 per year and joint-filers making more than $150,000 per year. The bill would also expand limits on contributions to health savings accounts.
Ways and Means Committee Markup of Affordable Care Act Replacement Bill, Part 1
On March 8, 2017, The House Ways and Means Committee met to mark up the budget reconciliation recommendations to repeal and replace the Affordable Care Act. Democratic committee members introduced numerous amendments and called for a delay until the Congressional Budget Office released the cost and potential impact of the new health care plan.
As information comes to hand, we will keep you updated on the proposed healthcare reform tax changes.