Obamacare Tax Ramifications

The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.

By R. Zebulon Law, Esq. and Christy L. Lewis, Esq.
R. Zebulon Law, A Professional Corp., Costa Mesa, CA

Now that the U.S. Supreme Court has officially upheld the Patient Protection and Affordable Care Act of 2010 (commonly known as "Obamacare"), the implementation of additional taxes will start taking place in the very near future. Most notably, individuals who fail to acquire "qualifying" health insurance coverage will be subject to an additional income tax of 1% in 2014, 2% in 2015, and 2.5% in 2016. Beginning in 2013, individual taxpayers making over $200,000 annually ($250,000 for married individuals who are filing jointly) will be subject to increased Medicare tax rates (2.35%, up from 1.45%) and an "unearned income" healthcare surtax of 3.8% on all interest, dividend, capital gain, and passive business income. These increases, coupled with the threat that Congress will fail to extend the Bush tax cuts, could result in taxpayers paying a 25% tax rate on income that, in 2012, would have been taxed at a rate of only 15%.

In addition to these individual tax increases, beginning in 2013, business owners will be required to satisfy numerous requirements related to employee healthcare plans and will be subject to a plethora of new taxes and expenses. For businesses, the tax consequences of Obamacare will become much more severe in 2014 when a barrage of new provisions take effect. Once these additional provisions take effect, businesses with 50 or more employees may find themselves subject to hundreds of thousands of dollars in increased tax liability and potential penalties for failing to comply with the new requirements.

For more information, in the Tax Management Portfolios, see Cowart, 389 T.M., Medical Plans — COBRA, HIPAA, HRAs, HSAs and Disability, and in Tax Practice Series, see ¶5920, Health & Disability Plans.
© 2012 R. Zebulon Law, APC.

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