Changes Arising From the Patient Protection and Affordable Care Act

Many have been talking about The Patient Protection and Affordable Care Act, informally referred to as “Obamacare”.  The question on everyone’s mind seems to be, “How will this affect my income taxes next year?”

“Obamacare” will implement several tax changes.  Below are some highlights of the changes that begin January 1, 2013:

.9% Additional Medicare Tax

Certain high-earning taxpayers will be subject to an additional Medicare tax.  The additional .9% tax will be applied to each dollar of an individual’s wages, other compensation, or self-employment income exceeding the threshold amounts below:

Filing Status

Threshold Amount

Married filing jointly


Married filing separately




Head of household (with qualifying person)


Qualifying widow(er) with dependent child


This will be an employee-only tax, which means that employers, although required to withhold the additional Medicare tax from the employee’s wages, will not be required to match the additional Medicare tax.  The IRS has provided answers to some FAQs here.

3.8% Surtax on Unearned Income

Certain individuals, estates, and trusts will be subject to a 3.8% tax on their unearned (investment) income.  Investment income consists of interest, dividends, capital gains, certain royalties and rents, and even some pass-through income from companies in which you do not actively participate.  The 3.8% tax will affect those with adjusted gross income over a certain threshold amount: $250,000 for joint filers, $125,000 for married filing separate filers, and $200,000 for all other filers.  The tax will be imposed on the lesser of either net investment income or the excess of modified adjusted gross income over the threshold amount.

Medical Expense Deduction

The medical expense deduction floor will increase to 10% of adjusted gross income.  In other words, you will be able to deduct only the amount of your medical expenses which exceed 10% of your adjusted gross income.  Prior to 2013, the floor was 7.5% of adjusted gross income.

2.3% Excise Tax

This tax will apply to all sales of certain medical devices intended for human beings.  The manufacturers, producers or importers of these devices will be responsible for paying the tax.

A good summary of other important tax changes due to “Obamacare” can be found by clicking here.  Please call your ShindelRock tax professional to discuss any questions you may have about the upcoming changes.