Tax Changes

Resources

More information about the credit, including a step-by-step guide and answers to frequently asked questions.

Contact

Jim Young
Director, Strategic Communications & Congressional Relations
Government & Public Affairs
Associated General Contractors of America
2300 Wilson Boulevard, Suite 400
Arlington, VA 22201
USA
Phone: (202) 547-0133
Fax: (202) 547-1635
http://www.agc.org

Contained within the law are tax changes not directly impacting health care which could impact future investment by individuals and employers. In total, the bill includes $437.8 billion in new taxes over the next 10 years.

Small Business Tax Credits

Employers eligible for the tax credit include firms with no more than 25 full time employees and annual average wages of less than $50,000. Employers must cover at least 50 percent of the total premium to be eligible. The credit is available to offset employer’s tax liability and is claimed on the employer’s tax return at the end of the year.

  • Phase I of tax credit: For tax years 2010 to 2013 eligible employers can receive a tax credits up to 35 percent of the employer contribution. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000.
  • Phase II of tax credit: For tax years beginning in 2014 the credit is increased to 50 percent of the employer contribution and is available for only two consecutive tax years.

Notes: For calculating the number of FTEs and their wages, the term “employees” excludes seasonal workers (working no more than 120 days during the year). In addition, the term “employees” excludes the following (as defined in the Internal Revenue Code): a self–employed individual, a 2 percent shareholder in an S–corporation, a 5 percent owner of an eligible small business, or someone who is a relation or dependent of these people. Thus, for example, the business will not receive a credit for small business owners or their family members.

Excise Tax

Beginning in 2018 the bill includes an excise tax on “Cadillac Plans”.

  • 40 percent excise tax on health coverage in excess of $11,850/$30,950 (for construction industry). Vision and dental excluded from excises tax which is levied at insurer level and employer must aggregate and provide information to insurers indicating amount subject to the excise tax.

HSA, FSA , HRA Definition of Medical Expenses

Beginning in 2011 the bill changes the definition of medical expenses and prohibits over–the–counter purchase of medical products.

Excise Tax on HSA & MSA Withdrawals

Beginning in 2011 the bill increases the tax on non–qualified HSA withdrawals from 10 percent to 20 percent and non–qualified Archer MSA withdrawals from 15 percent to 20 percent.

HSA Limits

Beginning in 2013 contributions to health FSAs are limited to $2,500.

Payments to Corporations

Beginning 2012 a new IRS reporting requirement will require information reporting on payments to corporations.

  • New information reporting for business–to–business transactions over $600.
  • Previously, businesses had to file a Form 1099–MISC for each person to whom they have paid at least $600 for services, but payments to most corporations were exempt but the bill eliminates the exemption.

Medicare Payroll Tax

In 2013 the bill increases the Medicare Part A (hospital insurance) tax rate on unearned income on earnings over $200,000/$250,000 and imposes a 3.8 percent tax on investment income for taxpayers with AGI in excess of $200,000/$250,000.

Other Taxes

Fee on drug manufactures, fee on insurance providers, tax on medical device manufactures, increase in medical expense deduction floor, limit compensation on insurance providers, excise tax on tanning beds, biofuel tax exclusion, codify economic substance doctrine, new fees to fund comparative research among others.