Do you love it or hate it? Do you call it Obama Care or the Affordable Care Act? Regardless of your thoughts, Baby Boomers need to understand this monumental program. Most importantly, as with all government funded programs, it costs money. In order to raise the funds necessary to pay for the Act, numerous taxes have been levied. There are five of these taxes that will affect Baby Boomers the most:
1. The Individual Mandate excise tax: As of 2014, everyone must now have health insurance. Often, seniors face a coverage gap between retirement and Medicare eligibility. As a result, people in this so called “gray area” are mandated to use a qualifying government-offered health insurance plan.
2. “Cadillac Policy” excise tax: Although the government wants to make sure you have insurance, they would prefer that you use their insurance, not your insurance. For any private policy that the government deems to be “too fancy”, a 40% tax will be levied on the premiums paid. For a single person, this tax will be on levied on any premium over $11,500 per year.
3. Dividends tax hike: Baby Boomers hold more blue chip stocks than any other segment of our population. It’s not even close. To fund Obamacare, tax rates on dividends for some Baby Boomers will rise by 3.8%. This raises the tax rate to over 43% on investments that are heavily relied upon by many Baby Boomers.
4. Medical device excise tax: How can the government pay for Obamacare without directly taxing citizens? Indirectly tax them, of course! Obamacare includes an excise tax on medical device manufacturers. Medical devices are predominantly used by seniors and Baby Boomers and they will feel the brunt of this tax when the manufacturers pass it along.
5. Reduction of a deduction: Although it may not seem like a tax, under the new law it is more difficult to take a deduction of allowable medical expenses. Previously, you could itemize medical costs once they exceed 7.5% of your adjusted gross income. Now, the expenses must be 10% of your adjusted gross income to take a deduction. By changing this tax law, the government is reducing the total deductions for medical expenses across the nation, thereby increasing the tax base.
These are five taxes that can adversely affect Baby Boomers. The times change and so do our laws. Make sure your estate plan stays up to date with these changes. To learn more about these changes or any issues with your estate plan, contact AlerStallings at 1.877.912.3464.