Healthcare Changes under the Tax Cuts and Jobs Act
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There have been many changes under the Tax Cuts and Jobs Act (TCJA) that affect the healthcare industry, healthcare workers, and taxpayers. We will go over a few of the key changes under the new law.
What has changed?
Prior to the tax reform, if a taxpayer and their dependents did not have qualified insurance coverage and did not meet an exemption such as being under the poverty threshold or have short gap in coverage they would face a penalty. The penalty paid was the greater of:
a) $695 for each adult per year (1/2 that for each dependent) OR
b) 2.5% of the taxpayer’s household income over a threshold amount
a) $695 for each adult per year (1/2 that for each dependent) OR
b) 2.5% of the taxpayer’s household income over a threshold amount
Under the Tax Cuts and Jobs Act (TCJA) the Affordable Care Act (ACA) individual penalty has been repealed. However it’s important to note that it doesn't go into effect until tax year 2019. So when you file your taxes in 2020 for tax year 2019, and you did not have insurance in 2019, you will not have to pay the penalty. If you did not have essential coverage in 2018 or did not qualify for an exemption, you will still have to incur the penalty for tax year 2018.
Another change moving forward is the IRS is now requiring taxpayers to state that they had minimum essential coverage. This is the first time this requirement is being enforced since the enactment of the ACA. Previously, this part of your return could be left blank without consequence. Starting 01/01/18, this must be disclosed or the tax return could be rejected and the taxpayer could be assessed the penalty.
Last key change we will cover regarding healthcare and new tax laws is, the medical expense deduction. It has been changed under the TCJA and has been made retroactive to include the 2017 tax year. Prior to the TCJA, taxpayers whose unreimbursed medical expenses exceeded 10% of their adjusted gross income (AGI) could deduct the amount over the excess. Under the new law it has been lowered to 7.5% of taxpayers' AGI.
Have any questions regarding the tax reform and healthcare? Call us today!
Another change moving forward is the IRS is now requiring taxpayers to state that they had minimum essential coverage. This is the first time this requirement is being enforced since the enactment of the ACA. Previously, this part of your return could be left blank without consequence. Starting 01/01/18, this must be disclosed or the tax return could be rejected and the taxpayer could be assessed the penalty.
Last key change we will cover regarding healthcare and new tax laws is, the medical expense deduction. It has been changed under the TCJA and has been made retroactive to include the 2017 tax year. Prior to the TCJA, taxpayers whose unreimbursed medical expenses exceeded 10% of their adjusted gross income (AGI) could deduct the amount over the excess. Under the new law it has been lowered to 7.5% of taxpayers' AGI.
Have any questions regarding the tax reform and healthcare? Call us today!