Tax Provisions of the Affordable Care Act for Minnesotans and Beyond

Published On: 12th July 2013

From The Internet

On March 23, 2010, the Affordable Care Act was enacted and contained a number of tax provisions that are currently in effect and will be implemented during the next few years. If you are wondering what those tax provisions are so far, the following gives you an idea of what to expect and how this may change income tax preparation procedures in the future..

One of the cuts that occurred on March 1, 2013 involves the Small Business Health Care tax Credit that certain tax-exempt small businesses were able to take advantage of. The total reduction of the claim is 8.7 percent. This sequestration reduction rate will be applied until September 30, 2013 or if Congress intervenes, which means the rate could change.

In 2011, insurance companies were required to spend a specific percentage of premium dollars on quality improvement activities and medical care. This was done to meet a medical loss ratio, or MLR, standard. If an insurance company is not meeting the MLR standard, they are required to provide rebates to their customers.

Employers are also required to report the cost of coverage under an employer-sponsored group health plan on the W-2s of their employees. Beginning in tax year 2012, many employers became eligible for transition relief or at least until the IRS issues more information regarding this reporting requirement. Nonetheless, the amount reported does not have any influence on tax liability, as the value of the employer’s contribution to an employee’s health insurance is still excludable from the employee’s income. It is this that makes it non-taxable. It is for reporting reasons only so that it shows the value of the health insurance benefits to the employees.

Starting in 2014, families and individuals can take a health insurance premium tax credit to help them pay for their health insurance coverage that is purchased through the Affordable Insurance Exchange. Exchanges will be operational in every state. The credit is refundable so taxpayers who have no or very little tax liability can still take advantage of the credit. The credit may also be paid to a taxpayer’s insurance company in advance to pay the premium costs.

Also beginning in 2013, the Affordable Care Act erected an annual fee on certain providers of health insurance. Thus far, the regulations for this have merely been proposed.

Of course, there are many other changes, such as additional requirements for tax-exempt hospitals, an annual fee on branded prescription pharmaceutical importers and manufacturers, retiree drug subsidies, and the adoption credit per child was raised and made refundable.