The health care law has provisions that may affect your personal income taxes. How the law may affect you may depend on your employment status, whether you participate in a tax favored health plan and your age.
Here are three timely tips about taxes and the health care law and how they may affect you.
1) Employment Status
- If you are employed your employer may report the value of the health insurance provided to you on your W-2 in Box 12 with Code DD. However, it is not taxable.
- If you are self-employed, you can deduct the cost of health insurance premiums, within limits, on your income tax return.
2) Tax Favored Health Plans
- If you have a health flexible spending arrangement (FSA) at work, money you put into it normally reduces your taxable income.
- If you have a health savings account (HSA) at work, money your employer puts into it for you, within limits, is not taxable.
- Money you put into an HSA usually counts as a deduction and can lower your taxes.
- Money you take from an HSA to use for qualified medical expenses is not taxable income; however, withdrawals for other purposes are taxable and can even be subject to an additional tax.
- If you have a health reimbursement arrangement (HRA) at work, money you receive from it is generally not taxable.
3) Age
- If you are age 65 or older, the threshold for itemized medical deductions remains at 7.5 percent of your Adjusted Gross Income (AGI) until 2017; for others the threshold increased to 10 percent of AGI in 2013. Your AGI is shown on your Form 1040 tax form.
For more information, give us at Bressler & Company at call at 559.924.1225 or go to IRS.gov/aca.
Article taken from IRS Tax Tips, dated 3/6/2014
