The Christmas Tax Bill

 

Senate Republicans passed President Donald Trump’s tax plan on December 2, 2017. Republicans still have a lot of differences between the House and Senate tax bills to compromise on.   The House and the Senate have to pass the “same” tax bill.   So which one would be “better.”   Better for whom, would be the question to ask.

I’m going to keep this simple for now.   After this bill is put into law that’s when things will get complicated.    But for now I will go over just a few things that make the House tax bill and the Senate tax bill different.

Family and Child Tax Credit
The House bill expands the credit to $1,600 per child and begins to phase it out for married couples making more than $230,000.   The Senate bill expands the credit to $2,000 per child, with a phaseout beginning at $500,000 of a couple’s income.

Mortgage interest deduction
The Senate bill keeps the limit for the mortgage interest deduction in place for homeowners  for  the first $1 million of home debt.   While the House bill caps it at the first $500,000 of debt.

Medical and Student Loan Deductions 
The House bill eliminates deductions for high medical expenses and student loan interest.  The Senate bill would leave the aforementioned deductions, intact.

The Affordable Care Act (ObamaCare)
The Senate bill repeals the Affordable Care Act requirement that individuals buy health insurance coverage.   Currently, the mandate is enforced via a tax penalty for people who fail to purchase coverage.  The House bill does not touch the mandate.

Trump predicts final passage before Christmas…..

“Obamacare”: Love It or Hate It

Photo by: Jonathan Velasquez

Obamacare – Unconstitutional!!! You shouldn’t be forced to purchase something you don’t want!  I’ve heard and seen these statements over and over and over and over again.  First let me clear up a few things before I go into what I really wanted to share with you about the Affordable Care Act – specifically the individual shared responsibility provision.   Ok here it goes … First “Obamacare” is NOT I repeat is not a health care plan.  Obamacare aka The Patient Protection and Affordable Care Act (PPACA), and commonly called the Affordable Care Act (ACA) is a United States federal statute signed into law by President Barack Obama on March 23, 2010. It represents the most significant regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965.

The ACA was enacted with the goals of increasing the quality and affordability of health insurance, lowering the uninsured rate by expanding public and private insurance coverage, and reducing the costs of healthcare for individuals and the government. It brought about mandates, subsidies, and Insurance exchanges which were intended to increase coverage and affordability.   The law also has required insurance companies to cover all applicants within new minimum standards and offer the same rates regardless of pre-existing conditions or sex.  The United States Supreme Court upheld the constitutionality of the ACA’s individual mandate as an exercise of Congress’s taxing power on June 28, 2012.

Love It or Hate It – It does not matter because it is a law and with any law comes consequences if you do not abide by them.  My purpose today is not to debate whether you should love it or hate it my purposes today is to educate you on the individual shared responsibility provision of the ACA and give you the resources to get through this process since 2014 tax year is when individuals were/are required to have qualifying health care coverage (called minimum essential coverage), qualify for an exemption, or make an individual shared responsibility payment, or SRP (penalty), with your Federal income tax returns.

If you’re required to have coverage, you’ll be charged a tax penalty by the government if you go without insurance for 3 consecutive months or longer. You won’t be charged the tax penalty if you are uninsured for less than 3 consecutive months. The penalty is $95/per adult and $47.50/per child for the first year or 1% of your AGI, whichever is greater (Maximum is up to $285 per family). If your household income is above 400% of the federal poverty level then you may be exempt from paying the penalty or if insurance in your area cost more than 8% of your taxable income (taking into account employer contributions or tax credits).  These amounts above are for the 2014 tax year.  On the chart below you will see how the penalties will go up in future years.

obama care penalty chart

See that was simple and painless.  I promised you some resources and you can definitely get them at www.dmtbookkeeping.com and click on the “Get Started” posted note or click on the one below and there you will find the calculators, exemptions forms and much more.

getstartednote

Affordable Care Act FAQS

Image

The Affordable Care Act.  Yes!  That’s right I said it.  The AFFORDABLE CARE ACT which is also known as the Patient Protection and Affordable Care Act but for most it has been referred to as “Obamacare.” Whatever you choose to call it, it’s all the same.

I know everyone is sick and tired of hearing about this so I’m going to keep it short and simple by answering the most frequent questions from individuals. I mean that’s what everyone is worried about right – how will “Obamacare” affect my 2014 tax return? Here is a list of questions that everyone is asking.

1.) What happens if I can’t afford health care coverage?

You may get financial help to assist in paying for coverage, care, or both. The amount is based on your income, where you live, other coverage that may be available to you, and if you are a U.S. citizen or lawfully present in the U.S.
You can find out if you qualify for reduced premiums and reduced cost sharing through the Health Insurance Marketplace. Here are some general income guidelines that might be used by the government to see if you qualify and how much help you would receive.

If you’re single, you could qualify if you make less than $45,960 (or if you live in Hawaii, less than $52,920).
For couples, you could qualify if you make less than $62,040 (or if you live in Hawaii, less than $71,400).
For a family of 4, you could qualify if you make less than $94,200 (or if you live in Hawaii, less than $108,360).

2.) What is the penalty for not having health care in 2014?

If you’re required to have coverage, you’ll be charged a tax penalty by the government if you go without insurance for 3 consecutive months or longer. You won’t be charged the tax penalty if you are uninsured for less than 3 consecutive months. The penalty is $95/per adult and $47.50/per child for the first year or 1% of your AGI, whichever is greater (Maximum is up to $285 per family). If your household income is above 400% of the federal poverty level then you may be exempt from paying the penalty or if insurance in your area cost more than 8% of your taxable income (taking into account employer contributions or tax credits).

3.) How will “Obamacare” affect my HSA (Health Savings Accounts)?

1.) The law eliminated one’s ability to use money in their HSA account to buy over-the-counter drugs

2.) The big change is that the law increased the penalty for withdrawing funds from your HSA before you reach age 65. The early withdrawal penalty increased from 10% to 20%.

4.) Can I keep the plan I already have?

That will depend on when your current plan first went into effect – what we call the “effective date” of your plan.
If your plan has an effective date before March 23, 2010, you may have what’s called a “grandfathered” health insurance plan, and you may have the option to stay on that plan or change to one of the new metallic plans.   But, your plan will lose its “grandfathered” status if your insurance company makes significant changes to your plan that reduce its benefits or increase its costs (which you may want to ask before they go changing things to trick you into buying another health plan that you didn’t need) So please get educated on what you need.
If your plan has an effective date between March 24, 2010 and January 1, 2014, it is a “non-grandfathered” plan and it may have to be converted to a new metallic plan in 2014.
Even if your plan’s renewal date is later in the year, it may need to be converted to a metallic plan by no later than March 31, 2014 or earlier.
But, in some instances your insurers may make the conversion as early as January 1, 2014.
If your plan is purchased with an effective date of coverage that is after January 1, 2014, that plan would need to have one of the metallic benefit levels.

5.) What will happen if my application gets declined?

Insurance companies are NOT allowed to decline your application for health insurance because you have a pre-existing medical condition, or for any other health-related reason. Which started January 1, 2014.

We’ll I hope this answered some questions. We also have a page dedicated to this. Just click HERE to be directed. I’m here to make your life a little less complicated. Feel free to send me a question at debbie@dmtbookkeeping.com.

Have a wonderful and healthy day!

Debbie