50+ Lifestyles

Health Care Reform – Fact vs. Fiction

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

There are several e-mail campaigns making their way around right now claiming that, beginning in 2011, taxable income on Forms W-2 will be increased to reflect the value of employer-provided health insurance. A typical e-mail warns: “You will be required to pay taxes on a large sum of money that you have never seen. Take your last tax form and see what $15,000 or $20,000 additional gross does to your tax debt. That’s what you’ll pay next year. For many it also puts you into a new higher bracket so it’s even worse. This is how the government is going to buy insurance for the 15% who don’t have insurance and it’s only part of the tax increases.”

The claim: Beginning in 2011, you’ll be taxed on the value of your employer-provided health insurance.

The facts: While it’s true that, beginning in 2011, the health-care reform legislation requires employers to begin reportingthe cost of employer-provided health-care coverage on an employee’s Form W-2, the cost is included for informational purposes only, to show employees the value of their health-care benefits. The amount reported is not included in income, and will not affect your tax liability.

The claim: Beginning in 2013, a new federal sales tax will apply to the sale of a home The claim is that, beginning in 2013, all real estate sales will be subject to a new 3.8% federal sales tax. The emails making this claim generally contain some variation of the following text: “Under the new health-care bill–did you know that all real estate transactions are now subject to a 3.8% sales tax? The bulk of these new taxes don’t kick in until 2013 … If you sell your $400,000 home, there will be a $15,200 tax.”

The facts: This claim, though inaccurate, has a basis in fact. There’s no federal sales tax being imposed on the sale of homes. But, beginning in 2013, the health-care reform legislation does impose a new 3.8% Medicare contribution tax on the net investment income of high-income taxpayers (individuals with adjusted gross income (AGI) exceeding $200,000, and married couples filing joint returns with AGI exceeding $250,000). Net investment income will include gain on the sale of a home. However, the tax will not apply to any gain from the sale of a principal residence that is excluded from income (individuals, if they qualify, can generally exclude the first $250,000 in gain from the sale of a principal residence; married couples filing joint returns can generally exclude up to $500,000). That means that in most cases, at least where a principal residence is concerned, the 3.8% tax would kick in only if your AGI exceeds the threshold above, and only if profit on the sale of the home exceeds $250,000 ($500,000 for married couples filing jointly).

Remaining Supply of Discount Prescription Cards Available: Many of you called concerning the discount prescription card we referenced last month. We still have a supply of cards available. If you are on Medicare and are experiencing a ‘donut hole’ or ‘gap’ with your Prescription Drug Program, these discount cards may be helpful. This discount card is available at no cost. I understand it can be used by anyone – one card is sufficient for spouses or for the entire family. If you would like to have one of these cards, contact us at 563.332.2200 or email rjsandassoc@att.net. We will be happy to get one to you.