The Strategic Outlook
Adobe Systems

Strategic Group · 4380 SW Macadam Ave, Suite 260  Portland, OR 97239 · (503) 222-9737   ·  www.InvestwithStrategic.com

Strategic Group’s e-update

Now that the two health care bills have passed, both sides will begin the process of spinning news about the legislation to suit their purposes.  Whether you agree or disagree with the legislation, it is unlikely to be repealed.  Once benefits are given, it is difficult for politicians to take them back.  Both sides would probably agree that the bill isn’t perfect and if the Medicare drug bill is any indication, will require “fixes” to correct unintended hardships or consequences.

 

I think it’s safe to say that most people think that the health care system did need to be fixed; however, the specifics as to whether this was the right fix will be debated for years to come.  Opinions are very strong on both sides and are probably not directly related to investments.  Although the availability and premium cost for insurance do play a significant role in people’s budget decisions for retirement, we wanted to focus more on the tax implications of the Health Care legislation.  In order to manage the tax consequences  we must first identify the timing of the changes and the affect on different sources of income.  It appears that tax and investment planning will become more important as the healthcare bill is phased in.  Whether you are in the higher tax brackets or the lower, consideration will need to be put on income levels to minimize consequences. 

 

The following table illustrates the material available at this time.  Please review any decisions that affect your tax obligations with a qualified tax professional.

If you are within the range of 100-400% of the Federal Poverty Level (see next page) credits may be available to help pay for the taxpayer portion of health insurance.

Paying for the Healthcare "Bill"

Strategic Group’s President, Bill Meyer, is highlighted in a local business owners’ newsletter. Click here to read more.

2010

Tax change

Tax

Affected

Comments

Tanning salon tax

10% tax on cost of services

Those who use indoor tanning salons.

Outdoor tanning is still free.

 

 

2011

Bush Tax Cuts set to expire

Varies

Varies

Unknown effect at this time. Expect changes.

Increased penalties on non-medical health savings account distributions

Penalty increases to 20%

Participants of HSAs or Archer MSAs

If you anticipate needing non-healthcare related funds in 2011, take the distribution before the end of 2010 if possible.

New annual fee on drug makers.

$2.5 billion annual fee

Drug makers – Yes

Drug buyers – Maybe

1. Stock up in 2010 if possible.

2.   Ask your doctor or pharmacist for lower cost alternatives.

3. Explore diet and lifestyle changes that will reduce dependence on drugs.

2012

Increased annual fee on drug makers

$3 billion annual fee through 2016

Drug makers – Yes

Drug buyers – Maybe

1. Lower cost alternatives.

2. Diet or lifestyle changes.

2013

Medicare tax on investment income.

Lesser of 3.8% of net investment income or the amount of income that exceeds the threshold for Modified Adjusted Gross Income.

Gross income above:

Individuals $200,000

Joint return $250,000

Married filing separately $125,000

Applies to interest, dividends, annuities, royalties, rents, and gains on sale of assets.  Does not appear to apply to municipal bonds.

Hospital insurance tax

.9% increase in Medicare tax

Salaries starting at $200,000 for individuals and $250,000 for couples.

 

Medical device excise tax.

2.3% excise tax on certain medical devices.

Excluded: Eyeglasses, contact lenses, hearing aids, and medical devices generally sold at retail to the public for individual use.

 

Contribution limits on Health Care Savings accounts.

Capped at $2500

Employer plans with current limits above $2500.

Try to budget discretionary health care expenses before 2013 if costs will exceed $2500.

Itemized deductions for unreimbursed medical change

Threshold increases from 7.5% to 10%

From 2013-2016 if either taxpayer is 65 or older, the old limits apply.

If affected, pay attention to Modified Adjusted Gross Income and items that affect it.

2014

Individual Mandate

$95 per individual,

$285 per family, or

1% of taxable household income.  For those not eligible for Medicaid, the cost for coverage would range from 3 to 9.5% of household income after credits.

Those with no coverage or coverage below acceptable limits.

1. Review credits available if income is below 400% of the Federal Poverty Level.

2. Research health insurance choices and premiums.

Annual fee on insurance companies.

$8 billion annual fee.

Premium payers – Maybe.

Stockholders – Maybe.

Insurance is required under age 65 unless income or religious exemptions apply.

2015

Individual Mandate

$325 per individual, $975 per family, or 2% of household income.

Those with no coverage or coverage below acceptable limits.

1.  Review credits available if income is below 400% of the Federal Poverty Level.

2. Research health insurance choices and premiums.

Annual fee on insurance companies.

$11.3 billion annual fee.

Premium payers – Maybe.

Stockholders – Maybe.

Insurance is required under age 65 unless income or religious exemptions apply.

2016

Individual Mandate

$695 per individual, $2085 per family, or 2.5 % of household income.  Adjusted for inflation after 2016.

Those with no coverage or coverage below acceptable limits.

1.   Review credits available if income is below 400% of the Federal Poverty Level.

2. Research health insurance choices and premiums.

2017

Annual fee on drug makers.

$3.5 billion annual fee.

Drug makers – Yes

Drug buyers – Maybe

 

Annual fee on insurance companies.

$13.9 billion annual fee.

Premium payers – Maybe.

Stockholders – Maybe.

 

2018

Excise tax on high-cost insurance plans.

40% excise tax on plans costing more than $10,200 for individual coverage or $27,500 for family coverage.

Unions or high-premium cost states.

There is currently some doubt as to whether this provision will be put in place.

Annual fee on drug makers.

$4.2 billion annual fee.

Drug makers – Yes

Drug buyers – Maybe

 

2019

Annual fee on insurance companies.

$14.3 billion annual fee.

Premium payers – Maybe.

Stockholders – Maybe.