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Outline of the Tax Provisions of HR 4872 The Health Care and Education Reconciliation Act

By Stacie Clifford Kitts, CPA

Okay so earlier this week I talked about the passing of HR 3590 aka the Patient Protection and Affordable Care Act which is now a law known as P.L. 111-148. 

However, the new law was amended yesterday by the passing of HR 4872 aka the Health Care and Education Reconciliation ACT.  This new bill is on its way to the president’s desk for approval.

As the Journal of Accountancy points out, this new bill adds stuff that was not built-in to  the Patient Protection Act.

If you need to get up to speed, you can  check out my previous post which outlines the original tax provision here Outline of Health Care Act – Tax Provisions of HR 3590.

The following is  a list of things that were changed or added.  For a complete analysis, check out the J of A’s article.

  • Premium Assistance Credit – Updated
  • Excise Tax on Uninsured Individuals – Updated
  • Adult Dependent – Updated
  • Excise Tax on High Cost Employer-Sponsored Coverage Updated
  • Medicare Tax on Investment Income ( I thought this one might be of particular interest to taxpayers so I have included the J of A’s analysis here- my take, this provision is likely to tick some folks off)

The Reconciliation Act added a new IRC § 1411 that imposes a tax on individuals equal to 3.8% of the lesser of the individual’s net investment income for the year or the amount the individual’s modified adjusted gross income exceeds a threshold amount. For estates and trusts, the tax equals 3.8% of the lesser of undistributed net investment income or adjusted gross income over the dollar amount at which the highest trust and estate tax bracket begins.

For married individuals filing a joint return and surviving spouses, the threshold amount is $250,000; for married taxpayers filing separately, it is $125,000; and for other individuals it is $200,000.

Net investment income is defined as income from interest, dividends, annuities, royalties and rents, other than such income derived in the ordinary course of a trade or business (however, income from passive activities and from a trade or business of trading in financial instruments or commodities is included in the definition of net investment income).

This provision applies to tax years beginning after Dec. 31, 2012.

  • Economic Substance Doctrine – New

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Here is a calendar of dates related to the Act to know:

Dates to follow  
January 1, 2010 Small Business Tax Credit – For tax Years Beginning on or after 1/1/10
July 1, 2010 Tax on Indoor Tanning Services – For services on or after 7/1/2010
January 1, 2011 Tax on HSA Distributions – For tax years beginning on or after 1/1/2011
January 1, 2011 SIMPLE Cafeteria Plans for Business – For tax years beginning on or after 1/1/11
January 1, 2011 Charitable Hospitals – For payments made on or after 1/1/2011
January 1, 2012 Medicare tax on Investment Income – for tax years beginning on or after 1/1/2012
October 1, 2012 Fees on Health Plans –  Beginning for plan years on or after 10/1/12
January 1, 2013 Medical Care Itemized Deductions Threshold -Beginning on 1/1/13
January 1, 2013 Additional Hospital Insurance Tax on High Income Taxpayers – For tax years beginning on or after 1/1/13
January 1, 2013 Flexible Spending Account – Tax years beginning on or after 1/1/13
January 1, 2014 Premium Assistance Credit – For years beginning on 1/1/14
January 1, 2014 Excise tax on Uninsured Individuals – Tax years beginning on or after 1/1/14,
January 1, 2014 Reporting Requirements – Beginning on 1/1/14
January 1, 2014 Cafeteria Plans – Starting 1/1/14
January 1, 2014 Employer Responsibility – Beginning on 1/1/14
January 1, 2018 Excise Tax on High-Cost Employer Plans – For tax years beginning on or after 1/1/18
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