Kids and taxes: six things to know about health care reform
Some of the provisions of the Affordable Care Act will be cause for celebration. From others, you may feel a pinch. Either way, here are six provisions you may want to be aware of:
1. Adult dependent children may stay on parent's policy up to age 26
One of the first health care reform provisions to go into effect was the extension of coverage to adult children. Coverage is not dependent on marital status, residency, financial dependence, student status or employment status.
2. Children with pre-existing conditions can get immediate coverage
Another early provision was to eliminate waiting periods for children younger than 19 with pre-existing conditions. The provision applies when a parent of the child is enrolled in a fully-insured group or individual health plan.
3. You're allowed less itemized deductions for medical expenses
Previously you could deduct medical expense above 7.5 % of your income. As of 2013, you can only deduct expenses above 10% of your income.
4. Taxes on income are increasing
Individuals who earn more than $200,000 and families with an income of more than $250,000 in 2013 will see a 0.9% tax increase in order to cover more Medicare costs. An additional 3.8% net investment income tax also began in 2013.
5. If you use a Health Savings Account; watch out for new taxes
Starting in 2011, Ineligible medical expenses are taxed up to 20% for people who use Health Savings Accounts (HSAs). Previously, the penalty was 10 percent.
6. Contributions to Flexible Spending Accounts will decrease
Many people love the tax-free nature of Flexible Spending Accounts. Previously participants could contribute up to $6,000. As of 2011, the maximum contribution is $2,500.