Posted on July 30, 2013May 31, 2016 by Jan Roberg

How Much is Obamacare Going to Cost Me?

Photo by Tom Hart at Flickr.com

Recently Congress delayed the requirement of businesses with over 50 employees to provide health insurance to their workers. They were supposed to start in 2014, but now that’s been extended to 2015. Congress did not extend the requirement of individuals to have insurance in 2014 though.

If you don’t already have health insurance coverage, what are you supposed to do? Good question. This isn’t something you’re just going to figure out in two minutes. I don’t have any easy answers for you. But I can help you get some of the answers you need to make your decisions.

What’s better, buying insurance or paying the penalty? Let’s be real, having insurance is better than not having insurance–but what’s it going to cost? You can’t buy insurance if you can’t pay for it.

First, let’s figure the cost of the insurance. Right now, the exchanges aren’t ready yet, but if you’re reading this after October 1, 2013, you should be able to go straight to the exchange and get solid dollar figures: https://www.healthcare.gov/

But in the meantime, I’ve found that the subsidy calculator from the Kaiser Family Foundation to be really helpful. Using their tool, you plug in your family income, ages, whether you smoke or not, and it will spit out what your insurance premium would be if you paid the full premium, and also how much of a subsidy you’d qualify for. Now remember, this calculator is based on averages from around the country. You may live in a more expensive or less expensive area. But at least this will give you some kind of clue as to what kind of money we’re talking about.

For example: let’s say we have a young couple with a baby. They don’t make very much, just $30,000 together for the year. They don’t smoke. According to the calculator–if they had to pay full price for their insurance, they’d pay $8,792 for a “silver plan” health insurance per year. Yowza! On a $30,000 a year income, there’s no way a family could afford that. But, because their income is low, they’d qualify for a subsidy. With the subsidy, they’d only pay $1,250 a year for that health insurance. That’s still kind of high when you only make $30,000 a year though. But if they chose the “bronze plan” their subsidy would completely cover their insurance and they’d be paying zero dollars to have health insurance. Zero’s a price I think they can live with.

What’s this “bronze” and “silver” stuff? The health plans are coded, bronze, silver, gold, and platinum. Bronze is the least comprehensive, platinum being the most. With a bronze plan, you pay 40% of your own costs, silver; 30%, gold 20% and platinum 10%. Basically, the more you pay for the premium, the lower your co-pay is.

In our earlier example, the couple wound up qualifying for free health insurance. What would happen if our couple made $50,000 a year instead? Same circumstances so the full premium would stay the same at $8,792. But, their subsidy would go down to $4,679 and their out of pocket would be $4,112. Or they could enroll in a bronze plan which would have them paying $2,607 after subsidies.

So the question becomes, do you buy the health insurance or do you pay the penalty for not having it? If they can’t afford the $2,607 how much is the penalty? For a married couple, (I’m using 2012 numbers because I don’t have 2014 yet), to compute the penalty for not having health insurance you would take their income (which is $50,000 in this example) and subtract the filing threshold (which for a married couple is $19,500) and then multiply by 1%. Like this:

$50,000 – $19,500 = $30,500 (they call this excess household income)

Then take 1% times the excess household income: $30,500 x .01 = $305

So for this couple, paying the penalty for not having insurance in 2014 will cost less than the insurance premium. I’m not saying they shouldn’t buy the insurance–I think insurance is a good thing. But you need to know what the options are. What it costs to have insurance, and what it costs to go without.

Take a look at the numbers for your family. Go to the Henry J Kaiser Family foundation website and check out their subsidy calculator. Here’s the link: http://kff.org/interactive/subsidy-calculator/

If you want to read more about penalties for not having insurance, check out my other blog post: http://robergtaxsolutions.com/2012/07/obamacare-what-you-need-to-know-part-1/

For more information about the Affordable Care Act, here’s a good, easy to understand video: http://www.youtube.com/watch?v=JZkk6ueZt-U

Posted on February 26, 2013May 31, 2016 by Jan Roberg

Maximizing Your Medical Expense Deduction

Photo by phalinn at Flickr.com

Updated for 2013

First things first, the vast majority of people won’t qualify for a medical expense deduction. You’ve got three big things in the way. The first is that your medical expenses have to be over 10% of your Adjusted Gross Income before you can start to claim them. (7.5% if you are 65 or over.) That means if you make $50,000 a year, your medical expenses have to be over $5,000 before any of it can be deducted. (Over $3,750 if you are 65 or over.) Second, even if your medical expenses are high enough to be deductible, you’ve got to have enough other deductible expenses to exceed the standard deduction to make claiming your medical expenses worthwhile. And third, for most people, their biggest medical expense is their health insurance—which, if you get it through work, it’s already been exempted from your income tax so you can’t use it on your Schedule A.

But even though you might not meet the criteria I mentioned above, you might still qualify for some type of medical expense deduction, so please bear with me a little longer.

Do you live in a state that has a medical deduction? Here in Missouri, there’s a deduction for health insurance. Many people don’t even know about the deduction so they don’t bother with it. Here’s the thing—if you list your health insurance, your prescriptions, and other medical expenses in the right boxes when you fill out your federal tax return—if you have a state deduction, it will flow through to your state tax return.

Why is it important to separate out your expenses and list them in the right boxes? Recently, I was reviewing a tax return prepared somewhere else. The taxpayer had several thousand dollars worth of medical expenses, including paying for his own health insurance. The preparer had totaled up all the expenses and put them all on the “other medical expenses” box. Now doing this made no difference on the taxpayer’s federal tax return. But when I separated out the man’s health insurance premiums, it saved him over $200 on his state tax return.

This was a Missouri tax return. Not all states have medical deductions. But if you don’t take shortcuts when you’re putting the numbers into your federal return, the numbers will flow to the proper spots on the state return.

Are you self employed? If yes, and you pay for your own health insurance, then you don’t have to claim it on the Schedule A—you can claim it on the front of your 1040 form on line 29. While this isn’t as good as being able to claim it as a business expense where you get to deduct it from self employment tax, placing a deduction on the front of the 1040 is still better than putting it on the Schedule A. The best part, you don’t even have to file a Schedule A in order to claim it.

But suppose you do have enough medical expenses to claim on your schedule A. You still want to put your self employed health insurance on line 29 first instead of on the Schedule for the best deduction. Let me explain with an example. This is going to have a lot of math but the math is just to prove my point. When you’re preparing your own tax return, all you have to remember is to put your deductions on the right line in the tax software–your software program will do the math for you.

A taxpayer aged 65 had medical expenses of about $10,000 of which $4,000 were for his self employed medical insurance. Let’s assume he had an AGI (adjusted gross income) of $50,000. If you lump all the medical expenses together, you take 50,000 and mulitply that by 7.5%–that becomes the floor amount; $3,750. All of the expenses over the $3,750 are deductible. $10,000 minuse the $3,750 equals $6,250. So if you’re in the 25% tax bracket, you’ve saved $1,563–sweet right?

But, if you took the $4,000 as your self employed medical insurance deduction first, that $4,000 would come off of your AGI. So your AGI would be $46,000. To compute the rest of your medical expense deduction you’d take 46,000 x .075 = $3450–that’s the new floor for claiming your medical expenses. But now, since you’ve used the 4000 someplace else, you have to take that out of the calculation so now your medical expenses on Schedule A are only 6000. With me so far? You take that 6,000 and subtract the 3,450 floor and you still have $2,550 in medical expenses on your Schedule A. So now, instead of writing off $6,250 you’re writing off $6,550 (the 2,550 plus the 4,000). Now your tax savings are $1,638–that’s $75 more than before. All you’ve done here is just move the number to the correct line.

$75 isn’t a lot of money, but wouldn’t you rather have that money in your pocket than give it to the IRS? I thought so.

Posted on January 21, 2011December 3, 2016 by Jan Roberg

Missouri Health Insurance Deduction

Missouri has a tax deduction for health insurance premiums

When you live in a state that has an income tax, like Missouri, you need to be aware of the state’s little deductions that aren’t automatically on your federal tax return. One of these is the Health Insurance deduction.

It’s very difficult to claim any medical deductions on your federal income tax return because you have to meet the requirement that your medical expenses exceed 10% of your adjusted gross income. In Missouri, you don’t have that. If your health insurance isn’t already exempt from taxes, you can claim your health insurance as a deduction on your Missouri State income tax return.

You’ll find the deduction on line 12 of the Missouri schedule A. For most people, its just a straight, direct entry on the form. If you happen to have been able to claim your health insurance on your federal schedule A, or had medicare payments withheld from your Social Security, there’s a worksheet to determine just how much of a deduction you’ll get to claim on your Missouri return. (For some people, your computer software will automatically calculate the amount of medicare insurance you can deduct, but you need to watch out if you’re adding additional insurance payments that you don’t delete the medicare payments.)

The health insurance deduction is especially valuable to senior citizens who may qualify for the Missouri Property Tax Credit. It not only reduces their taxable Missouri income, but by reducing the income, it can increase the amount of property tax credit they receive. Many seniors who qualify for the property tax credit don’t have any Missouri taxable income so the preparers don’t bother to look for deductions and that’s a mistake.

If you’d like to take a look at the worksheet for the qualified health insurance deduction, click on this link:

Missouri Health Insurance Worksheet

Also, if you happen to be self employed, be sure to check my post about the Missouri Self-Employed Health Insurance Tax Credit. If you qualify for that, it’s even better for your taxes than the deduction.