REPLACING THE AFFORDABLE CARE ACT
The American Health Care Act (AHCA) has passed the House and the Senate is now considering their version of health care, the Better Care Reconciliation Act (BCRA). Both bills make significant changes to America's current health mandate, the Affordable Care Act. The changes that affect the tax return include:
- Repeal of the shared responsibility payment, which was the greater of $695 per uncovered individual or 2.5% of the taxpayer's household income for tax year 2016. If either bill becomes law, any SRP paid for the 2016 tax year will be refunded to the taxpayer.
- Repeal of the 3.8% investment income tax
- Repeal of the 0.9% additional Medicare tax
- Reduction of the medical expense deduction adjusted gross income (AGI) threshold; currently 10%, the threshold would drop to 5.8% under the AHCA and 7.5% under the BCRA
- Allowing unlimited pretax contributions to flexible spending accounts (FSAs) and resinstating the right to use FSA funds for over-the-counter medication (a limit may still be imposed by the taxpayer's employer)
- Reduction of the premium tax credit beginning in tax year 2020