Obamacare Taxes in 2014

At the end of 2012, we discussed the implementation of the Affordable Care Act also known as Obamacare.  The article discussing the taxes which began in January of this year can be found here:  Obamacare 2013.  The taxes which began in January are the first phase of the Act with the second phase coming in January of 2014.  While we are still roughly 8 months away, we thought we would mention that health care insurance premiums could dramatically increase as insurance providers pass on the new taxes to consumers (see Tax on Health Insurers below). Anyone who is paying for health insurance should expect an increase in premiums.

Below is a summary of the taxes that will take effect in 2014.

Individual Mandate Excise Tax (Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following:

	1 Adult	2 Adults	3+ Adults
2014	1% AGI/$95	1% AGI/$190	1% AGI/$285
2015	2% AGI/$325	2% AGI/$650	2% AGI/$975
2016 +	2.5% AGI/$695	2.5% AGI/$1390	2.5% AGI/$2085

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases.

 

Employer Mandate Tax (Jan 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees.  Applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000.  If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Tax on Health Insurers (Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018. Fully-imposed on firms with $50 million+ in profits.

With the economy still struggling to grow at full capacity, we expect these additonal taxes could weigh heaviliy on consumer spending in 2014.