Recent postings have reviewed the Affordable Care Act's (ACA) new Medicare taxes on net investment income and earned income. A couple of other tax increases also occur in 2013.
Reduction in Itemized Medical Deductions. Currently unreimbursed medical expenses must exceed 7.5% of adjusted gross income (AGI) to net an itemized deduction. For tax years beginning after 2012, the ACA raises the threshold to 10.0% for taxpayers under age 65. For those age 65 and older, the 10.0% threshold starts in 2017.
Reduction in Health FSA Contributions. Currently, there is no upper limit on the amount of money that can be contributed on a pre-tax basis to a health care, flexible spending account, except as limited by the employer's cafeteria plan. For plan years beginning after 2012, the maximum amount that can be contributed to a health care FSA is limited to $2,500; indexed for inflation after 2013. This low limit will increase both income and FICA taxes on those who would like to contribute more than this amount to pay for their medical expenses. Coupled with the increase of the AGI limit above, this change is a particularly effective means of raising taxes on sick people.
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