We’re all getting used to the changes set forth by the Affordable Care Act.
While politicians continue to yell about portions of the law, we want to make sure the yelling doesn’t drown out what you need to know about potential savings, and additional costs, for your family.
“New Jersey has been in the forefront of insurance reform and is one of the states that ACA was modeled after,” says Frank Ruggiero, director of broker education at Slattery GA, a division of Bollinger in Short Hills.
But costs are costs. Here are five items you need to know.
Deducting medical expenses
It’s going to be harder to deduct your medical expenses in 2013. For those who itemize (you can’t take these deductions if you don’t), you will need medical expenses that exceed 10 percent of your adjusted gross income for your federal tax return. It used to be 7.5 percent, an easier threshold to reach. It will remain at 7.5 percent for those older than 65 until 2016. For your New Jersey tax return, the threshold remains at 2 percent.
Tax-advantaged savings accounts
Some employers offer flexible spending accounts, or FSAs, which allow you to save money, before it’s taxed, for certain expenses. In 2013, the max you’ll be able to save is $2,500, which is expected to be increased over the years for inflation.
Then, there are health savings accounts, or HSAs, which can offer even greater advantages. You would be eligible for this kind of account if you have a high-deductible insurance plan. In 2013, the single deductible must be at least $1,250 or $2,500 for family coverage to qualify. You can set aside $3,250 for an individual, or $6,450 for a family, and these contributions will lower your taxable income.
“In general, the HSA provides a vehicle for employees to save money for future health care costs,” says Bill Guerci, a certified public accountant with Solid Benefit Guidance in River Vale. “Each year on an employee’s tax return, they must account for the deposits and withdrawals from the account.”
HSAs have another major difference from FSAs. FSAs are “use it or lose it” plans, where if you don’t spend all the money you set aside by the end of the year, it’s gone forever. Not so with HSAs, which are portable, and your money can stay in the account until you spend it.
Depending on your income level, you may be eligible for tax credits to help you pay for the health insurance you buy in the health care exchanges.
“The tax credits are a critical piece of the puzzle to reach full coverage,” says Douglas Johnston, governmental affairs manager for AARP New Jersey, which supports the widening of coverage under ACA. “The tax credits will help many New Jersey small businesses and hundreds of thousands of people get affordable health care coverage.”
You’ve got some time for this one, but be prepared. In 2018, insurers (which could be an employer, an insurance company or a third party that handles your plan) will pay a 40 percent tax on the portion of your health benefit premiums that are more than $10,200 for individual plans and $27,500 for family plans, says the AARP. These are the so-called Cadillac health plans. You won’t pay this directly, but you can expect many insurers will pass on the cost to you.
If you earn more than $200,000 as an individual, or more than $250,000 if you’re married filing jointly, you’ve seen your Medicare taxes rise from 1.45 percent to 2.35 percent. Make sure that your employer is withholding enough so that you don’t owe more when you file your 2013 tax return. Those who earn less are not affected by that change.
To learn more, the AARP has developed a personalized online tool, the Health Law Guide, to help Americans of all ages understand benefits available now and in the future under ACA. Visit aarp.org.