2014 is a big year for Health Care Reform. Major changes will begin and the IRS is responsible for monitoring compliance with the new laws. To fund the projected costs of Health Care Reform, taxes have been added and others increased. So whether your income is high, low or in-between, everyone is affected in some way.
All Americans are required to maintain health insurance. Do you have Health Care coverage through your employer? on Medicare or Medicaid? If you do, great, you are covered! If not, you are now required, by law to purchase your own coverage. If you or anyone in your household or on your tax return do not have coverage and don't qualify for an exemption, a penalty will be assessed starting with your 2014 tax return.
The Individual Health Care Exchanges began in late 2013 for 2014 coverage in most states including Washington state. If you purchased Health Insurance through an exchange you may be eligible for a tax credit. If you estimated this 2014 tax credit, adjustments will be made on your 2014 tax return based on your actual income.
For those with higher incomes two taxes were introduced in 2013. The Medicare tax on earned income increased from 1.45% to 2.35%. The Unearned Income Medicare Contribution Tax was added in 2013. This is a 3.8% tax assessed on unearned income such as interest, dividends, capital gains, rent and royalty income.
An additional tax bracket was added in 2013 making the top tax bracket 39.6%, up from 35%.