May 16, 2017
AHCA’s Potential Impact
By Cody Lange, Senior Assistant Tax Specialist
Recently, The House of Representatives passed the American Health Care Act (“AHCA”), which is designed to repeal and replace the Affordable Care Act (“ACA”). The Bill now sits with the Senate for its consideration.
If passed in its current form, the AHCA would repeal (and in some cases replace) the following key existing ACA tax provisions:
The Individual Mandate (effective 2017)
Individuals would no longer be required to maintain “minimum essential health care coverage”. Consequently, this would eliminate the shared responsibility payment that is currently calculated and assessed on taxpayers’ individual income tax returns.
The Employer Mandate (effective 2017)
The penalty for the failure of a large employer (i.e. employers with 50 or more “full time equivalent” employees) to provide affordable coverage to all full time employees would be eliminated.
Premium Tax Credit (effective 2020)
The ACA’s “premium tax credit” was intended to help make purchasing health insurance coverage more affordable for people with moderate incomes.
The “premium tax credit” would be replaced with a new refundable credit, ranging from $2,000 to $4,000 per individual, and would be subject to an income phase-out starting at $75,000 for individuals and $150,000 for married couples filing jointly.
The 3.8% Net Investment Income Tax (effective 2017)
Individuals (with over $200,000 of adjusted gross income), married couples filing jointly (with over $250,000 of adjusted gross income), and married individuals filing separately (with over $125,000 of adjusted gross income) would no longer be subject to an additional 3.8% tax on income such as interest, dividends, and other passive income.
The 0.9% Medicare Tax (effective 2023)
Individuals would no longer be subject to an additional 0.9% tax on excess wages and/or self-employment income over $200,000 for individuals, $250,000 for married couples filing jointly, or $125,000 for married couples filing separately.
The 7.5% / 10% Of AGI Floor For Medical Expense Deduction (effective 2017)
The “7.5% (under age 65) and 10% (65 and older) of adjusted gross income” threshold for deducting medical expenses on individual tax returns would be eliminated, and replaced with a “5.8% of adjusted gross income” threshold.