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Obamacare Taxes: How the Changes Will Impact Your Income

Obamacare taxesThe Affordable Care Act, better known as Obamacare, has created controversy among both supporters and opponents. Expect the arguments to get even louder once taxpayers start having to pay for it.

In just a couple of months, two tax increases tied to Obamacare will take effect. With the provisions squarely aimed at high-income earners, they're almost certain to polarize the debate over health-care reform even further.

Two 'New' Obamacare Taxes

The new taxes are aimed at boosting and extend the reach of Medicare payroll taxes for taxpayers above certain income levels.

Under current law, the government charges a tax of 2.9% on wages and self-employment income. For employees, your employer covers half of that tax, and the other half is withheld automatically from your paycheck.

That rate will soon be raised to 3.8% for single filers who have earnings of more than $200,000. For joint filers, the limit is $250,000. Moreover, the entire additional 0.9% will come out of your pocket.

Single filers can expect their withholding to be done correctly by their employers, but joint filers may need to pay additional tax out-of-pocket because their respective employers won't know how much the couple earned in total.

The other new tax, known as the Unearned Income Medicare Contributions tax, extends the 3.8% Medicare tax beyond wages and earnings to include investment income. In this case, the IRS will look at all of your income and determine how much of it pushed your income above the $200,000 limit for singles or the $250,000 limit for joint filers. To the extent that investment income reaches above those limits, you'll have to pay the new 3.8% tax on that amount. For instance, if you're single and had income of $205,000, $15,000 of which came from investment income, then you'd pay the new investment-income tax on the $5,000 that pushed your income beyond the $200,000 limit.

Don't Expect Romney to Save You

Of course, the presidential election could play a pivotal role in the future of health-care reform, as Republican candidate Mitt Romney has vowed to repeal Obamacare if elected. Yet unless Democrats lose not only the Oval Office but also their control of the Senate, Romney won't have the power to fulfill his promise unilaterally. And even with GOP control of Congress and the White House, a filibustering Democrat minority in the Senate might make repeal a tall order.

High-income taxpayers need to assume that the new Obamacare taxes will take effect as planned and use favorable provisions like retirement accounts to protect their incomes from the tax.

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What is Form 1095-C: Employer-Provided Health Insurance Offer and Coverage

The Affordable Care Act, or Obamacare, requires certain employers to offer health insurance coverage to full-time employees and their dependents. Further, those employers must send an annual statement to all employees eligible for coverage describing the insurance available to them. The Internal Revenue Service (IRS) created Form 1095-C to serve as that statement.

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

What are 1095 Tax Forms for Health Care?

The Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C. These forms help determine if you need to comply with the new shared responsibility payment, the fee you might have to pay if you don't have health insurance. For individuals who bought insurance through the health care marketplace, this information will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.

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BANKRUPTING SMALL BUSINESS – I’m actually not sure this mandate will bankrupt a large number of small businesses. They simply need to lay off workers or cancel upcoming hiring projects, in order to offset the added costs of providing health insurance. Now if that business employs union labor and the union somehow prevents the company from laying people off, then yes, it could go bankrupt. However, if it employs union labor, chances are the union is already taking the business owner for everything he’s got. My point is this is job killer and inhibits a small business’ ability to grow.
SOCIALISM: WPA and TVA are examples of socialism. TVA’s overhaul to compete with other utilities companies when competition was increased due to deregulation is a good example of how inefficient and unproductive a socialist enterprise becomes. There is nothing wrong with public works projects and other short term endeavors in times of need. There is nothing wrong with providing aid to citizens who are in dire straits. However, balance is critical, and our country has shifted WAY out of balance. Again, this legislation is actually brilliant, because Obama-automatons can say, ‘the government isn’t taking over healthcare. It’s reforming through private companies.’ Well, if I came into your business, told you how much of your money you had to spend on services versus administration, told you exactly what products you had to sell, AND told you your pricing could not exceed 9.5 % of your customer’s salary (capping), AND on top of that made you pay me more money (tax increase on insurers), I think you would say I was taking over your business.
In fact, I think you would accuse me of running your business into the ground, which I believe is the ultimate end game of this administration. Several of the less self-restrained progressive activists see it that way as well and have been caught on video at conferences overtly proclaiming this to be the case. It’s designed to eventually drive insurers out of business, or at least create a situation down the road where the government needs to come in and “save the day” by creating a government run healthcare system, which is always unsustainable, always limits treatment choices, and always results in bad service quality.

November 09 2012 at 10:50 PM Report abuse rate up rate down Reply


MEDICARE IS BEING CUT - “The Affordable Care Act did indeed cut Medicare spending by $716 billion, as the Congressional Budget Office wrote in a July 24 report. It does that by reducing payments to Medicare hospitals and doctors, essentially ratcheting down the amount they receive when they see a patient.” -- Washington Post
By controlling how much a provider will be reimbursed, they are in effect rationing care. Providers will not offer / perform services that they can’t be properly reimbursed for.
DEATH PANEL COMMENT -- “Death Panel” was stated as a projection of what will come. You cannot call this a lie until we see the effects long term. Before this legislation was passed, if you recall, Obama established an “end of life ethics” committee to explore end of life issues. You’re a fool if you think the discussions didn’t revolve around when a provider could stop treating an elderly or critically ill patient… and still be “ethical”… by their definition of ethical, I assume. Then, of course, the topic of euthanasia is a given when end of life ethics is being discussed. As with the reduction of payments to Medicare hospitals and doctors, cited above, IPAB will recommend reductions in reimbursement to health insurance companies, and depending on who is in congress those recommendations could be passed, thus disincentivising certain medical treatments… in other words rationing care. Be honest. HOW ELSE CAN THEY POSSIBLY CONTROL MEDICAl COSTS with this legislation. We can’t have tort reform, and the systemic issues that drive costs up aren’t being addressed. This is a just a bandaid measure with ulterior designs. The only option is to discourage more expensive treatments… and eventually they won’t be available at all, except for the very rich who can pay out of pocket. This is a brilliant part of the legislation, because simple-minded people like this author reads it and says, ‘See? They can’t dictate treatment, etc’. However, they can force treatment restrictions by reducing reimbursements. And Medicare reimbursement reductions are already put in motion.
MIDDLE CLASS SHOULDERING BURDEN -- First of all, most households bringing in over $200,000 are actually middle class, particularly those living in cities with high costs of living and with multiple kids… then there are the 85% of small businesses that file as individuals. However let’s go with your definition of middle class. The insurance companies, pharma and manufacturers will pass on the additional tax expense to the consumers… most of whom are middle class. If the federal government prevents them from doing so -- for example, this legislation caps what insurers can charge for policies -- then they will offset costs by laying people off and reducing quality of product.

November 09 2012 at 10:47 PM Report abuse rate up rate down Reply

Does this include free eye glasses, dental, major medical, safety glasses, uniforms, and free pair of work shoes?

October 24 2012 at 2:44 AM Report abuse +1 rate up rate down Reply

Create good jobs for the unemployed and poor then you might get off the hook comprendo?

October 24 2012 at 2:41 AM Report abuse +1 rate up rate down Reply

Somebody has to pay because of all those outsourced jobs have left the middle class and under broke!

October 24 2012 at 2:39 AM Report abuse +1 rate up rate down Reply

Go to youtube and search obamaphone lady. She is typical of what's wrong with life long entitlement programs.

October 24 2012 at 12:50 AM Report abuse rate up rate down Reply

Well there ya have it. The low income folks get free health care, we get to pay for it. Really nice. Thanks alot Mr. President......................

October 23 2012 at 11:32 PM Report abuse +1 rate up rate down Reply


October 23 2012 at 11:10 PM Report abuse +1 rate up rate down Reply

I can't beleive HP put this out before the election, and actually printed that YOUR taxes will go up. Not just people over $200,000. I thought Owebama said it was all free.

October 23 2012 at 10:56 PM Report abuse rate up rate down Reply
1 reply to dt1064's comment

Did you even read the article?

October 23 2012 at 11:43 PM Report abuse +3 rate up rate down Reply


October 23 2012 at 10:25 PM Report abuse -2 rate up rate down Reply
1 reply to sjpxmas's comment

LIberal means tax the Middle Class and spend that money on useless projects to get re-elected!

October 24 2012 at 5:57 AM Report abuse -1 rate up rate down Reply