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Possible Tax Increases to Pay for Health Care Reform

By Gregory Herman-Giddens

As reported in the Giftlaw eNewsletter, the potential tax increases to pay for healthcare reform may include the following:

1. Employer Health Care Exclusion

-- The exclusion could be capped or phased-out for higher-income employees. For higher-income persons, part of their medical premium will be taxable, even though paid by the employer.

2. Income Tax Deduction -- The 7.5% floor for medical expenses could be raised to a substantially higher level and reduce the value of the deduction.

3. HSAs and FSAs -- The health savings account (HSA) or flexible spending arrangement (FSA) could have reduced contribution limits. FSA fund distributions could be limited to qualified itemized medical deductions.

4. Medicare -- All state and local employees may be required to participate.

5. Alcohol Tax - An increased and uniform national tax may apply to alcohol.

6. Soft Drink Tax -- A new tax may be levied on sugar-enhanced beverages.

7. Top Brackets Increase -- The current top 35% and 33% brackets may rise to 39.6 % and 36%.

8. Itemized Deduction Limits -- Higher income individuals may have a 3% floor on deductions and would also lose their personal exemptions.

9. Capital Gains Tax Increase -- The 15% capital gains tax rate may be increased to 20%.

10. Estate Tax -- Retained with $3.5 million exemption and 45% rate.

11. Estate Tax Discounts -- Valuation discounts reduced or eliminated.

12. Grantor Retained Annuity Trusts -- GRATs limited to ten years or longer.

 

 

Full post as published by North Carolina Estate Planning Blog on May 23, 2009 (boomark / email).