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Shown that seniors aged 65 and up claim more

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Unformatted text preview: shown that seniors aged 65 and up, claim more deductions and deduct larger amounts than younger taxpayers (www.wsj.com). Similar to how the Affordable Care Act will have an effect on the threshold amount for medical deductions, the popular fringe benefit, Flexible Spending Account, will also be affected. A Flexible Spending Account is set up by an employer and employee in which the employee will tell his or her employer to set aside funds from the employee’s wages and salary. These funds are diverted from pre-tax wages. When utilized, they must be used to cover out-of-pocket healthcare expenses like co-pays, deductibles, orthodontia, and fertility treatment. Previously, before the Affordable Care Act there was no tax-law limit to the amount that an employee could contribute to this account. Now, however, there will be a maximum limit of the amount of salary an employee can put into their Flexible Spending Accounts. This amount is $2500 and has taken effect starting at the beginning of this year (www.forbes.com). Another area of Flexible Spending Accounts that is affected has been in practice now since the beginning of 2011. At the start of 2011, Flexible Spending Accounts would not be allowed to reimburse an individual for the cost of over-the-counter drugs or medicine. The only way an individual may be reimbursed is if they obtain a prescription from a doctor (www.irs.gov). Similar to Flexible Spending Accounts, Health Savings Accounts are also used by an employee to help pay for the cost of medical expenses. Health Savings Accounts are funded through contributions from a self-employed individual and employees. These contributions are deductible in computing Adjusted Gross Income. A Health Savings Account is a tax-advantaged savings account that is used in conjunction with an eligible high deductible insurance plan that allows an employee to deposit a certain amount of money each year on a pre-tax or tax deductible basis and use the money for qualified medical expenses. Unlike Flexible Spending Accounts which are a ‘use it or lose it’ type of accounts, any amount at the end of the year in a Health Savings Account will carry over to the next year as long as they are used for qualifying medical expenses. Any distribution from a Health Savings Account not used for a qualified medical expense is included in the beneficiary’s gross income. The amount will be treated as ordinary income. Since 2011, the distributions made from a Health Savings Account saw an increase in the tax dictated by the Affordable Care Act. The additional tax for those distributions included in gross income has risen from 10% to 20% (www.foxbusiness.com). That tax is placed upon early withdrawal of Health Savings Accounts as well. One provision of the Affordable Care Act that has caused a big controversy since its enactment is the Medical Device Tax. Entitled in the Internal Revenue Code as Section 4191, this provision calls for an excise tax of 2.3% on those companies that deal with the manufacture, production, and importation of taxable medical devices. The tax would be placed on the sales production, and importation of taxable medical devices....
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shown that seniors aged 65 and up claim more deductions and...

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