The Affordable Care Act: How will it affect your 2014 taxes?

Staggered start dates. Exceptions. Waivers. Are you still trying to determine how the health care laws will affect your 2014 personal and business federal income tax returns? We can help. Here’s an overview we’ve put together of some current rules. Here’s an overview of some current rules.BarackObamaportrait

Individual penalty. The 2014 Form 1040 has a new line for reporting the “individual responsibility payment.” You’ll owe this penalty if you or your dependents did not have health insurance during the year and don’t qualify for an exemption.

  • The amount you’ll report on your 2014 tax return is the greater of $95 per adult and $47.50 per child, up to a maximum family penalty of $285, or 1% of your “household income formula.”

Individual premium credit. Depending on your income, you may be eligible for a reduction in the cost of your health insurance premium during the year.

  • When you signed up for insurance on the health insurance exchange, you had the option to use the reduction to offset your premiums as you paid them. Alternatively, you can apply for the credit when you file your 2014 federal income tax return.
  • The amount of the credit depends on your income and family size.

Net investment income surtax. You may be familiar with this 3.8% surtax from last year’s return. It applies to net investment income – income such as dividends, interest, and capital gains, less related expenses – when your adjusted gross income (AGI) exceeds certain levels.

  • Those levels have not increased for 2014. When you are married filing jointly, the surtax applies if your AGI exceeds $250,000. When you’re single or filing as head of household, the AGI threshold is $200,000.

Medicare surtax on wages. As in 2013, this 0.9% surtax applies to wages, compensation, and self-employment income when your AGI exceeds $250,000 and you’re married filing jointly. When you’re single or filing as head of household, the AGI threshold is $200,000.

Business health insurance premium credit. Did you pay at least 50% of the health insurance premium costs for your employees during 2014? If you employed fewer than 25 full-time equivalent employees and paid them wages of less than $50,800, you may be able to claim a credit of up to 50% of the premiums you paid.

  • The credit is available even if you claimed it in prior years. Tax-exempt organizations can also benefit.

Business fee. When you self-insure your business health care expenses, you may have to pay a fee to help fund a healthcare research institute. The fee may also apply to your health reimbursement arrangement or health flexible spending arrangement.

Employer penalties. Depending on the number of workers you employ, you may be penalized for not providing health insurance and/or not providing affordable health insurance.

  • Neither penalty applies for tax year 2014. However, you’ll want to review your workforce to determine whether the penalty will affect you in the future.
  • Beginning January 1, 2015, the penalty will apply when 100 or more full-time employees work in your business. The penalty applies in 2016 when your business employs 50 or more full-time workers. When you employ fewer than 50 workers, you’re not subject to the penalty.
  • Employer reporting. The health care laws included a requirement for reporting on Forms W-2 the cost of the health insurance coverage you provide to your employees. However, reporting is optional for 2014 when you file fewer than 250 Forms W-2.