The Patient Protection and Affordable Care Act (PPACA) changed a few things that may affect your taxes. The IRS released an article in their newsletter discussing how the law impacts personal income taxes. Here’s what you need to know.
- If you receive a W-2, you may notice that your employer reported the value of your health insurance in Box 12 with Code DD. This is just informational, and is not taxable.
- If you’re self-employed, you can deduct the cost of most health insurance premiums.
- If you have a Health Flexible Spending Arrangement (FSA), you can reduce your taxable income by contributing to it.
- If your employer contributes to your Health Savings Account (HSA), that money is not taxable.
- Money you contribute to your HSA usually counts as a deduction.
- If you take money out of your HSA to use for qualified medical expenses, it’s not considered taxable income. (However, withdrawals for other purposes are taxable, and are also subject to an additional tax.)
- If you have a Health Reimbursement Arrangement (HRA), the money you receive from it is usually not taxable.
- If you’re 65 or older, the threshold for itemized medical deductions is 7.5% of your Adjusted Gross Income until 2017. If you’re under 65, the threshold has increased to 10% of AGI.
You can learn more about how the health care reform affected taxes at IRS.gov.aca. If you have questions about how the law impacts you, feel free to call me at 864-836-3136 and we’ll schedule a time to talk.