Obamacare means higher taxes for some in 2013

Starting in January, Obamacare may force some South Floridians to pay more in federal income taxes — and it’s not just the wealthy.

The frugal and the ill could end up having to shell out more taxes in 2013 because medical income tax deductions are being trimmed, starting Jan. 1.

Obamacare “is bringing in revenue without raising tax rates,” said Louis Balbirer, a certified public accountant and director of tax services at the Fort Lauderdale office of Kaufman Rossin

Restricting Healthcare Flexible Spending Accounts (FSA) to $2,500 or less a year, Balbirer said. The accounts now allow workers to save an unlimited amount tax-free for anticipated medical bills in a year. Most save less than $2,500 in the account. But some — including the frugal who budget — save more if they know they’re going to have surgery, dental work, high prescription bills or other medical expenses. Now they will have to pay federal taxes on those medical costs above $2,500. Those include the chronically ill, such as the diabetic. In years after 2013, the $2,500 ceiling will be adjusted for inflation.

Raising the limit on itemized medical expense deductions from 7.5 percent of adjusted gross income to 10 percent. In 2013, South Floridians, 64 and under, will have to have higher medical expenses to be able to take the deduction and save on federal taxes,  said Sheri F. Schultz, a Plantation certified public accountant.  “This  is going to take so many people out of getting the deduction,” she said.

A worker earning $50,000 a year will have to have at least $5,000 in non-reimbursed medical expenses, up from $3,750 this year. “It’s a big burden to get over,” CPA Balbirer said. In 2017, the limit will be expanded to include those age 65 and older, he added.

Higher Medicare taxes for the affluent. Obamacare raises in 2013 the current 2.9 percent Medicare tax  to add on an extra 0.9 percent for those single tax filers who earn more than $200,000 a year or $250,000 for married couples filing jointly, said Coral Springs certified public accountant Joel Feller. “That’s a payroll tax,” he said.

“It’s not a split,” accountant Balbirer added. “The entire 0.9 percent will be withheld from the employee.”

Employees currently pay half of the Medicare tax at 1.45 percent; the employer pays the other 1.45 percent, Balbirer said. The self-employed pay the entire 2.9 percent — although they are allowed an adjustment to gross income for half of the tax, he added.

In January, the affluent will also pay an extra 3.9 percent tax on capital gains, dividends, interest, annuities, royalties, rental income and on investments, Plantation accountant Schultz said.

“A lot of people don’t even know about this,” she said.

The new investment law affects single tax filers who earn more than $200,000 a year or $250,000 for married couples filing jointly, Schultz added.

Read about this tax article in the Sun Sentinel.