Thursday, April 22, 2010

What You May Not Have Known About Health Care Reform

You’ve probably had about all you can stand of listening to the politicians and talking heads on TV going on and on about health care reform. And you may have even thought you had a basic understanding of what they were up to. But have you taken a look at some of the ways they’re going to pay for it? For example, The threshold for you to claim an itemized deduction for unreimbursed medical expenses has rocketed from 7.5% to 10%, Do you frequent tanning salons? Expect to pay a 10 percent excise tax, And if you buy devices such as wheelchairs, you’ll pay a 2.3 percent excise tax. There is, however, a provision that should really get your blood boiling: Effective December 31, 2012, there will be a 3.8% excise tax on net investment income for single filers reporting income over $200,000 and joint filers reporting income over $250,000. Net investment income is defined in the Bill as: “The excess (if any) of the sum of (i) gross income from interest, dividends, annuities, royalties, and rents, other than such income which is derived in the ordinary course of trade or business…” This the first time ever that Americans will have to pay Medicare taxes on investment income. And interesting to note is that President Obama had asked for a 2.9% tax. So you can thank Congress for making it higher. Of course, for the time being this extra tax only applies if you make big bucks. But I think it’s just the beginning. The way I see it, taxing Roth IRA withdrawals or life insurance death benefits are a real possibility. How about reducing the threshold on taxable Social Security benefits? Or tacking a Social Security tax on annuity income? After that, the sky’s the limit, and middle-income Americans are bound to be the next targets. What ever it is, you can bet your bottom dollar that it won’t be the last time elected officials in Washington go after your retirement income to finance the soaring national debt. Best wishes, George

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