In June, a U.S. Supreme Court ruling allowed the Affordable Care Act to continue in its present form. That means you’ll need to consider the law’s provisions in your year-end planning. Here’s a review.
● Premium credit for individuals
This federal tax credit provides a subsidy to help pay health insurance premiums. The amount you can claim depends on income and family size. Planning tip: Adding a dependent or getting a raise can affect the amount of your credit. Run the numbers before year-end to avoid an April 15 surprise.
● Individual penalty
The penalty applies when you or your dependents do not have health insurance during the year and don’t qualify for an exemption. Planning tip: If you were uninsured for no more than two months during 2015, the penalty doesn’t apply.
● Net investment income surtax
The 3.8% surtax applies to net investment income when your adjusted gross income (AGI) exceeds $250,000 when you’re married filing jointly ($200,000 when you’re single or filing as head of household). Planning tip: Net investment income includes dividends, interest, and capital gains (minus related expenses). Consider tax-efficient moves such as rebalancing assets between taxable and tax-deferred accounts.
● Medicare surtax on wages
The 0.9% surtax applies to wages, compensation, and self-employment income when your AGI exceeds $250,000 and you’re married filing jointly ($200,000 when you’re single or filing as head of household). Planning tip: Your employer is not required to withhold for the surtax unless your wages exceed $200,000. If you’re married and your joint income exceeds the threshold, revise 2015 estimates or withholding to avoid penalties.
● Employer penalties
These penalties apply when you don’t provide health insurance and/or affordable health insurance to employees. For 2015, the penalties can apply when 100 or more full-time employees work in your business. The penalties begin in 2016 when your business employs 50 or more full-time workers. When you employ fewer than 50 workers, you’re not subject to the penalties. Planning tip: Make sure workers are classified correctly as employees or independent contractors.
If you have questions about the Affordable Care Act and 2015 tax planning, please call.
This memo is intended to provide you with information about minimizing your taxes. Do not apply this general information to your specific situation without additional details. For details and guidance in applying the tax rules to your individual circumstances, please contact us.