In addition to the various provisions contained in the new act, a number of new tax laws took effect Jan. 1, 2013, as a result of 2010’s heathcare reform legislation.
Hospital insurance tax on high-income individuals
The employee portion of the hospital insurance tax portion of FICA (which funds Social Security), normally 1.45 percent of covered wages, is increased by 0.9 percent on wages that exceed a threshold amount. The additional tax is imposed on the combined wages of both spouses filing a joint return.
The threshold amount is $250,000 in the case of a joint return or surviving spouse and $200,000 for an unmarried individual. Any portion of the tax not collected through payroll withholding will be paid with the annual income tax return.
Self-employed individuals are also subject to the additional tax if the combination of their net earnings from self-employment and any wages exceeds the threshold amount.
Medicare tax on investment income
An additional tax at the rate of 3.8 percent applies to the lesser of:
- An individual’s net investment income for the year, or
- The amount by which the individual’s AGI for the year exceeds a threshold amount.
The threshold amounts are the same as those for the new health insurance tax – $250,000 for a joint return or surviving spouse and $200,000 for an unmarried individual.
Medical expense itemized deduction threshold
The threshold for the itemized deduction for medical expenses not covered by insurance is increased to 10 percent of AGI. In the years 2013-2016, if the individual or either spouse on a joint return has turned age 65, the threshold remains at 7.5 percent of AGI.