The penalty for not having health insurance is not due to be put into effect till 2014. People who do not have health insurance in 2013 will not have to worry about it. (They may worry about the cost of medical care, but not about being penalized for not being insured.)
Once the penalty goes into effect, it appears, from what I can see, that it will not actually be payable until the person files his or her 2014 tax return in 2015.
At that point the IRS has been given limited powers to collect it. Tax liens and seizing of property will not be allowed. However, the IRS will have some powers and will probably find a way.
For 2014 the minimum penalty will be $95 per person. For a family of three, the minimum will be $95 X 3 = $285. For families with more than three members, the minimum is frozen at $285. (They stop counting after the third family member.)
The maximum amount of the penalty will be determined by a percentage of taxable income. For 2014 it will be 1%. When it is fully phased in starting in 2016, it will be 2.5%.
But that maximum will not be allowed to go higher than the national average of low-cost plans being offered through the insurance exchanges that will be set up by the law.
Tuesday, November 20, 2012
Friday, November 16, 2012
Fiscal Cliff, Tax Aspects
Here are some notes on tax changes scheduled on Jan 1st, if Congress and the President can't get together:
1. Income tax rates will go up (for example, for a married couple):
a) The 10% bracket will become part of the 15% bracket (i.e., there will no longer be a 10% bracket).
b) The 15% bracket will go from taxable income of $0 to $60,550 instead of the current $17,001 to $69,000.
c) The 25% bracket goes to a rate of 28%.
d) The current 28% bracket goes to 31%.
e) The 33% bracket becomes a 36% bracket.
f) The 35% bracket goes to 39.6%.
2. The tax on long term capital gains goes up as follows:
a) For people in the current 10% and 15% bracket for regular income tax, the capital gains rate goes from zero (no tax at all) to 10%.
b) For everyone else it will go from 15% to 20%
c) For upper income people (in the $200,000-plus range), there will also be a 3.8% Medicare surtax.
3. The thresholds for Alternative Minimum Tax go back to where they were in the year 2000. This would mean that probably millions more people would find their tax jacked up by the AMT, which was originally conceived to snag only the very wealthy.
4. Employees' FICA tax withholding would go from 4.2% to 6.2%. (This does not include the Medicare tax withholding of 1.45%, which would not change--except for a .9% increase for the 'wealthy'.)
5. "Obamacare" changes and taxes kick in as follows:
a) The medical deduction threshold for itemized deductions goes from 7.5% to 10%, except for people 65 or older. This will mean that many people who deduct medical expenses will see their deduction shrink or disappear.
b) Increased Medicare taxes for high-incomers
c) Misc other taxes and fees.
6. Reduction of the Child Tax Credit
7. The ability of small and mid-sized businesses to write off (rather than depreciate) purchases of equipment and other assets will be cut from a limit of $125,000 to $25,000. (In 2011 the limit was $500,000.) This has been a very big tax break for small businesses, and having it reduced to $25,000 will make a huge difference to many of them.
8. Various deductions, credits, etc. will expire, such as teachers' deductions for teaching supplies, Qualified Charitable Distributions from IRA's, etc.
1. Income tax rates will go up (for example, for a married couple):
a) The 10% bracket will become part of the 15% bracket (i.e., there will no longer be a 10% bracket).
b) The 15% bracket will go from taxable income of $0 to $60,550 instead of the current $17,001 to $69,000.
c) The 25% bracket goes to a rate of 28%.
d) The current 28% bracket goes to 31%.
e) The 33% bracket becomes a 36% bracket.
f) The 35% bracket goes to 39.6%.
2. The tax on long term capital gains goes up as follows:
a) For people in the current 10% and 15% bracket for regular income tax, the capital gains rate goes from zero (no tax at all) to 10%.
b) For everyone else it will go from 15% to 20%
c) For upper income people (in the $200,000-plus range), there will also be a 3.8% Medicare surtax.
3. The thresholds for Alternative Minimum Tax go back to where they were in the year 2000. This would mean that probably millions more people would find their tax jacked up by the AMT, which was originally conceived to snag only the very wealthy.
4. Employees' FICA tax withholding would go from 4.2% to 6.2%. (This does not include the Medicare tax withholding of 1.45%, which would not change--except for a .9% increase for the 'wealthy'.)
5. "Obamacare" changes and taxes kick in as follows:
a) The medical deduction threshold for itemized deductions goes from 7.5% to 10%, except for people 65 or older. This will mean that many people who deduct medical expenses will see their deduction shrink or disappear.
b) Increased Medicare taxes for high-incomers
c) Misc other taxes and fees.
6. Reduction of the Child Tax Credit
7. The ability of small and mid-sized businesses to write off (rather than depreciate) purchases of equipment and other assets will be cut from a limit of $125,000 to $25,000. (In 2011 the limit was $500,000.) This has been a very big tax break for small businesses, and having it reduced to $25,000 will make a huge difference to many of them.
8. Various deductions, credits, etc. will expire, such as teachers' deductions for teaching supplies, Qualified Charitable Distributions from IRA's, etc.
Saturday, November 10, 2012
Social Security increases
Social Security benefits will increase by 1.7% in 2013. Also, people aged at least 62 but less than 66 who have chosen to begin collecting Social Security before their full retirement age can make up to $15,120 in 2013 without having their benefits cut. This is up from $14,640 in 2012. (People above the full retirement age can earn as much as they want without benefit cuts.) People who reach retirement age during 2013 will be able to earn $40,080 before their birthday without losing benefits.
Monday, November 5, 2012
2013 Capital Gains Tax
One of the changes scheduled to go into effect for 2013 is an increase in the capital gains tax rate to 20% for most taxpayers. (For taxpayers in the 15% bracket, the rate will be 10%.)
The prospect of this tax increase coupled with the addition of an Obamacare surtax of 3.8% for people in upper income brackets is prompting some people to accelerate asset sales so that they are completed in 2012 instead of 2013.
This year the capital gains tax rate for people in the 25% bracket and above is 15%, and there is no Obamacare surtax. People in brackets below 25% do not pay capital gains tax at all!
It is widely hoped that the increase in the capital gains tax will be one of the things that will be changed by Congress before the end of the year, but no one knows if that change will actually be made.
The prospect of this tax increase coupled with the addition of an Obamacare surtax of 3.8% for people in upper income brackets is prompting some people to accelerate asset sales so that they are completed in 2012 instead of 2013.
This year the capital gains tax rate for people in the 25% bracket and above is 15%, and there is no Obamacare surtax. People in brackets below 25% do not pay capital gains tax at all!
It is widely hoped that the increase in the capital gains tax will be one of the things that will be changed by Congress before the end of the year, but no one knows if that change will actually be made.
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