If You Think Halloween is Scary, Look at These Increasing Tax Rates

On June 28, 2012, the United States Supreme Court ruled that the Patient Protection and Affordable Care Act, commonly known as ObamaCare, is constitutional. In doing so, the act has set in motion a slew of tax hikes. ObamaCare includes tax increases costing more than $675 billion over the next 10 years. More than half of these tax hikes would affect families earning less than $250,000 per year. Here are a few of the most important tax hikes that affect everyone:

1. Individual Mandate Excise Tax (Jan 2014): Anyone not buying “qualifying” health insurance must pay an income surtax. The Congressional Budget Office estimates that more than six million American families will be liable for the tax. The surtax amount is based on the following:

2. Medicare Payroll Tax Hike (Jan 2013): Currently, everyone pays a Medicare payroll tax of 1.45% on all earned income. This tax will be increased by .9% to 2.35% on earned income over $250,000 for household ($200,000 single).

3. Surtax on Investment Income (Jan 2013): Creation of a new, 3.8% surtax on investment income earned in households making at least $250,000 ($200,000 single).

4. Excise Tax on Comprehensive Health Insurance Plans (Jan 2018): There will be a new 40% excise tax on taxpayers who are covered by high-cost “Cadillac” health insurance plans.

5. Medicine Cabinet Tax (Jan 2011): Americans are no longer able to use flexible spending account, health savings account, or health reimbursement pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

6. HSA Withdrawal Tax Hike (Jan 2011): Taxpayers who withdraw money from health savings accounts for non-medical expenses before age 65 face a 20% penalty, up from 10% before.

7. The Medical Itemized Deduction Hurdle (Jan 2013): Taxpayers who face high medical expenses will only be allowed a deduction for expenses to the extent those expenses exceed 10% of adjusted gross income, up from 7.5% now.  Taxpayers 65 and older can still use the old 7.5% threshold through 2016.

In addition, there are fourteen other tax increases that are created under ObamaCare. For a full list of tax hikes imposed under the Patient Protection and Affordable Care Act, visit here.

To help you transition to retirement, we’re hosting a special event on November 1 at the Doubletree in St. Louis Park.  We’re bringing in guest speakers to discuss a lot of different aspects, including strategies to help make your savings last through your retirement.  To RSVP for this event, simply visit our website and click on the events section.

Significant tax changes are potentially in our future, so it is crucial that you begin developing strategies with a financial professional, like us at Secured Retirement Advisors, to reduce your taxes in the future. If you would like a complementary “3 Step Review” of your own retirement plan, call Secured Retirement Advisors at 952-460-3260.