July 12, 2012


Marjorie from Manalapan, NJ:


How will my taxes be affected by the Affordable Care Act (“Obamacare”)?


Friedenthal Financial:


Great question…..and we’ll preface by saying that this bill was far too long for us to read verbatim!  That said, here are a few highlights that we’ve gleaned from our wending.


There will be a 3.8% surtax on investment income for families with more than $250k (or $200k for individuals) in Adjusted Gross Income (AGI).  This tax will be paid on dividends, interest, and capital gains (long term and short term).  There will also be a 0.9% increase to Medicare taxes.


Flexible Spending Account contributions will be limited to $2500/yr.  Also, you won’t be able to include over-the-counter medications.  On top of that, Medical expense deduction hurdle is increasing to 10% of AGI (from 7.5% now).

If you don’t buy health insurance at all, you will be subject to taxes on your AGI of 1%, 2%, and 2.5% (2014, 2015, 2016 respectively), subject to minimum dollar amounts as well (by year and number of people).


Keep in mind that taxes on dividends and long term capital gains are slated to go up in 2013 (from 15% to 20% on long term capital gains, and a maximum ordinary income bracket of 39.6% on dividends), if the so called “Bush-era tax-cuts” are not extended.  For investors subject to the 3.8% surtax, this will be added to their ordinary income tax rate for investment income, taking that rate to a max of 43.4%! Many pundits believe the “Bush-era tax-cuts” will be extended, though Obama recently proposed a bill to extend them only for families under $250k in AGI. Note, individuals and families with over $250k in AGI will still benefit from extension, just not on the excess over $250k.


There is also still material opposition to the Affordable Care Act, namely by the Republican Party.  Romney has stated, if elected, he will attempt to have this Act repealed.  His effectiveness will likely be dependent on which party has control of Congress.  Stay tuned…


We hope that helps and provides fodder for discussion. Please let us know if we can be of further service!


The Friedenthal Financial Team

856-210-6494 (Office)

856-210-1565 (Facsimile)




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