YOU ASK:

Won’t the benefits in the health care reform result in higher taxes?

WE ANSWER:

The health reform bill is supposed to be funded by cost savings resulting from more efficient operations of medical services providers. However, there will also be changes in how insurance and related products and services will be taxed.

Admittedly, the health care reform will result in higher taxes for some parties, even as it works to the benefit of others (particularly those who can hardly afford the insurance and are sometimes forced to do without it).

Those who will see increases in terms of higher taxes will be:

  • Those in the high-income bracket. People who earn $200,000 or more annually as individuals or $250,000 as a married couple. When before the Medicare taxes charged is at 1.45%, those who fall under the high income bracket will be shelling out 2.35% as part of the Medicare payroll tax rate. Please note that the rate will be applied only to investment income.
  • Those who buy "top-of-the-line" insurance products. Those who want and can afford to pay for the best health insurance plans available in the market will have to also pay for what is called the "Cadillac Tax". This tax is charged for those who have health insurance plans that cost more than $23,000 (for a family plan) or $8,500 (for a single plan). This is based on employer-sponsored plans. Effective in 2018, this tax is at 40% of the premiums that exceed the specified limit.
  • The Uninsured. Those who don't have health insurance by 2014 will be required to pay 1% of his income or $95, whichever is greater. This will increase through the years.
  • Tanning salons. Services from indoor tanning salons will be given a 10% tax on their fees.

Also, there will be a medical expenses threshold set. Out-of-pocket medical expenses may not be tax deductible until it has reaches more than 10% of one's gross adjusted income. The effect would be to have higher taxes since you will have fewer deductions.

On the other hand, there will also be other people who will enjoy tax breaks, such as small businesses and individuals who buy health insurance.

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