Impact of the Affordable Care Act on your income taxes
The Affordable Care Act may affect your 2013 taxes but TaxAct can help.
Doctor and patients
The most significant implications of the Patient Protection and Affordable Care Act of 2010, also known as “Obamacare,” are just
around the corner. In addition to having wide-ranging effects on health insurance in 2014 and 2015, the legislation also impacts
“Though the Affordable Care Act has implications on income taxes, you can still act confidently when preparing your tax return with an
online solution,” says TaxAct spokesperson Jessi Dolmage. “The question and answer interview will cover all the tax law changes.”
The health care act included several tax law changes for 2013 federal income tax returns due April 15, 2014:
Employees will report the total amount paid by them and their employer for health insurance premiums, flexible spending beyond
payroll deductions and other premiums, on their returns. “The amount is needed for health insurance changes; it doesn't impact your
taxable income,” explains Dolmage. “Simply enter the amount in Box 12 with Code DD on your Form W-2 when prompted by the tax
If you itemize deductions, the threshold for deducting medical expenses increases to 10 percent of your adjusted gross income (AGI).
The threshold for taxpayers age 65 and older remains at 7.5 percent. The tax software will calculate the deduction after you enter your
A 3.8 percent tax on net investment income will apply to taxpayers at higher income levels based on filing status. Individuals and heads
of household with an AGI of $200,000 plus, married couples filing separately with an AGI of $125,000 plus, and couples filing jointly
with an AGI of $250,000 plus must pay the tax. Answer a few questions about investment income and your tax program will do the rest.
Taxpayers in those same AGI ranges will also pay an additional 0.9 percent Medicare tax on wages and compensation in excess of
$200,000. The tax is automatically withheld from employee wages, with the total amount provided in Box 6 of your Form W-2. If you're
a business owner or self-employed, the tax is calculated using figures on your Schedule SE.
The health insurance requirement doesn't have tax implications for another year. If you have health insurance, your online tax solution
will guide you through the simple process of reporting it on your 2014 tax return due April 2015. If you don't have health insurance for
a total of three or more months in 2014, you may pay a penalty that's reported and calculated on your tax return. Tax programs will
calculate the amount based on number of uninsured individuals in your household and household income.
Uninsured individuals can shop and apply for health insurance through online “marketplaces,” also called “exchanges,” starting Oct. 1.
States will have their own marketplaces, use the federal government's Health Insurance Marketplace or a hybrid of the two. Enrollment
closes March 31, 2014.
If you don't have access to minimum required employer-provided insurance and purchase insurance through a marketplace, you may
qualify for an advanced premium tax credit applied directly to your monthly premiums. Eligibility and amount are based on the cost of
marketplace premiums and your household size and income. If you do not take advantage of the advanced premium tax credit, you
can still claim the refundable credit on your 2014 tax return. Cost-sharing subsidies may also be available for other health care
expenses such as deductibles, co-payments and coinsurance.
Whether you have a simple or complex situation, 1040 Tax Direct makes it easy to navigate the tax implications of the Affordable Care
Act anytime, anywhere. Visit the Health Insurance Marketplace for information about insurance options at www.healthcare.gov. We
can assist you in determining the best buy for your health care needs. Contact Us
|New Federal Tax Law May Affect Some Refunds Filed in Early 2017;
IRS to Share Details Widely with Taxpayers Starting This Summer
The Internal Revenue Service has announced initial plans for processing tax returns involving the Earned Income Tax
Credit and Additional Child Tax Credit during the opening weeks of the 2017 filing season. The IRS is sharing the
information now to help the tax community prepare for the 2017 season, and plans are being made for a wider
communication effort this summer and fall to alert taxpayers about the changes that will affect some early filers.
This action is driven by the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) that was enacted Dec. 18, 2015,
and made several changes to the tax law to benefit taxpayers and their families. Section 201 of this new law mandates
that no credit or refund for an overpayment for a taxable year shall be made to a taxpayer before Feb. 15 if the taxpayer
claimed the Earned Income Tax Credit or Additional Child Tax Credit on the return.
This change begins Jan. 1, 2017, and may affect some returns filed early in 2017. Additional information is listed below.
To comply with the law, the IRS will hold the refunds on EITC and ACTC-related returns until Feb. 15.
This allows additional time to help prevent revenue lost due to identity theft and refund fraud related to fabricated
wages and withholdings.
The IRS will hold the entire refund. Under the new law, the IRS cannot release the part of the refund that is not
associated with the EITC and ACTC.
Taxpayers should file as they normally do, and tax return preparers should also submit returns as they normally do.
The IRS will begin accepting and processing tax returns once the filing season begins, as we do every year. That will
The IRS still expects to issue most refunds in less than 21 days, though IRS will hold refunds for EITC and ACTC-related
tax returns filed early in 2017 until Feb. 15 and then begin issuing them.
This is one more step the IRS is taking to ensure taxpayers receive the refund they are owed. The IRS plans to work
closely with stakeholders and IRS partners to help the public understand this process before they file their tax returns
and ensure a smooth transition for this important law change.
More information about this law will be posted to IRS.gov and shared with partners and taxpayers throughout the
second half of 2016.
Page Last Reviewed or Updated: 09-Jun-2016