Even if you owe Affordable Care Act taxes, you probably won’t have to start paying them until next year. But H&R Block wants you to come in and talk about them now.
“The Affordable Care Act means big changes this year when you file your taxes,” a chipper Block employee says in a new television ad. She says the company offers a free “tax and health care review.”
Actually, most health act taxes kick in this year and in 2014, so the earliest you’d have to file them is a year from now. (Tanning parlors starting paying their health-act taxes in 2010, but they’re probably not filing through H&R Block.)
But Block says it’s not too early to get advice on potential health act tax liabilities and eligibility for health coverage.
“When we talked to consumers it was very apparent that they are very confused about what’s going on,” says Meg Sutton, senior adviser for tax and health-care services at Block. “It’s critical that consumers get out and educate themselves about the Affordable Care Act and how it can affect them and their families.”
For example, those without health insurance may want to know what their penalty would be if they don’t sign up for coverage by the 2014 deadline, she said in an interview. And if you want to get coverage for next year, the exchanges will use the household size and income on your 2012 tax return to determine your eligibility for subsidies, some of which will be delivered as an income tax credit.
Many health-act taxes will be paid by high-income households, which probably don’t use H&R Block either. Starting this year couples with more than $250,000 in income will pay a payroll surtax for Medicare and a 3.8 percent tax on investment income.
But non-high-rollers could also be paying taxes to finance the health act. Starting in 2014, most individuals who lack health insurance will owe a penalty to be collected by the Internal Revenue Service. The penalty, which the Supreme Court ruled is a tax, starts at $95 and rises to $695 in 2016.
Households may also owe extra tax thanks to an increase in the floor for deducting health costs. Starting this year most folks can deduct only medical expenses that exceed 10 percent of their income; it used to be 7.5 percent. The health act also caps at $2,500 how much you can contribute to a pre-tax flexible spending account for health care. (Health savings accounts, a type of pretax account without the “use it or lose it” provision in FSAs, have different rules.)