New Insurance Mandate Under Trump (Obamacare Revisions)

When Obamacare went into effect in 2010, it imposed a lot of changes to the tax law. However, Trump's new insurance mandate is currently upending many of those changes.

Penalty for Not Having Insurance
Until 2019, you will pay an additional tax if you don't have health insurance for at least nine months out of the year. Starting in 2016, the tax was raised to 2.5 percent of your adjusted gross income. In 2019, the Trump tax plan eliminates the tax.

Tax Benefits Reduced
If you itemize, you can only deduct medical expenses that aren't covered by your health insurance and exceed 10 percent of your income. Prior to the ACA, you could deduct expenses that exceeded 7.5 percent of your income. In 2017 and 2018, Trump's tax plan returns this deduction to the pre-ACA levels.

Income Tax Raised
Do you make more than $200,000 a year? Do you file jointly as a married couple earning at least $250,000 for each year? Are you married but filing separately and earn at least $125,000 yearly? If you answered yes to any of these, you will pay extra income taxes. That's an additional 0.9 percent Medicare hospital tax on your income and self-employment profits above the stated thresholds. You are also taxed an extra 3.8 percent on investment income. These include dividends and capital gains that are above the threshold.

Business Taxes
Cadillac Tax. Companies that offer high-cost health insurance plans, called Cadillac plans, will be levied a 40 percent excise tax. These plans have premiums of at least $10,200 for individuals or $27,500 for families. They are needed by those in dangerous jobs. It's been delayed until 2022. Lobbyists worked to repeal the tax in 2018 because that's when businesses would begin planning for 2020. 

Businesses
With less than 25 employees, you may qualify for a 50 percent tax credit for health insurance. You are eligible if the average wage of your employees is less than $50,000 and you pay at least half of the premiums. That doesn't apply to the health insurance costs of owners.

With less than 50 employees, you can use the health insurance exchanges to help you find the cheapest plans.

With 50 or more employees, you must pay an excise tax of $2,000 per employee if you don't provide health insurance. An exception applies for the first 30 employees. 

All businesses can get federal financial assistance if you offer health insurance to early retirees from 55 to 64 years old. You can get a tax credit of 28 percent of drug costs if you provide prescription coverage for retired employees. 
As mentioned, the tax reform eliminated the ACA penalty beginning in the tax year 2019. Because the Tax Cuts and Jobs Act makes other changes with how the penalty is calculated, taxpayers need to be aware- as it will impact their tax liability. You can learn more about how these changes could impact you personally by scheduling a free consultation with a tax professional at VA Accounting + Income Tax.