Hidden taxes in Affordable Care Act could cost small businesses

The ACA is a financial burden and the federal government had to find a way to pay for it, which translates into higher taxes
December 2, 2013 4:43:51 PM PST
The controversy over the Affordable Care Act continues well beyond the problems with its website. There are some of hidden tax costs that could impact local businesses.

Like it or not, the Affordable Care Act is a financial burden for the federal government, which means Washington had to find a way to pay for it, and that translates into higher taxes.

Lisa Roth co-owns an interior design business, and figuring out how to navigate what the new health care law means for her company's bottom line hasn't been easy.

"It's been real complicated figuring out what's been happening in Washington," she said.

Roth is like a lot of small business owners, trying to run a company, take care of employees, and not get hit with a big tax burden.

"What we're trying to do is take money that we would normally be required to now pay in taxes and try to give that to our employees so they have more benefits," Roth said.

Her financial planners say there are a lot of hidden costs associated with the new law. Anyone household making over $250,000 adjusted gets hit with an additional Medicare tax. Investment income above that amount gets hit, too.

"We're not talking about any kind of itemized deductions or standard deductions or exemptions that go into this. It's just adding up all of your income and seeing if it's over $250,000," said Jillian Nel with Legacy Asset Management.

"You're gonna need some pretty sophisticated tax advice or tax software or planning in the years to come," said Joe Birkofer with Legacy Asset Management.

Then there is the impact on employees' health care options based on how taxes impact large employers.

The so-called Cadillac Tax is designed to encourage companies to choose lower-cost health plans for employees and levies a 40 percent tax on high-cost plans ($10,200 for individuals, $27,500 for families). And while it does not include long-term accident or disability insurance and isn't effective until 2018, companies are planning for it now.

"In 2018, for a normal plan, the average plan is probably going to be pretty close to $10,000, so instead of hitting the high-income, rich-benefit plans, it really going to hit all of the normal people on Main Street," said Carter Freeman with The Freeman Agency, an insurance broker in Harris County.

All of it, as Roth has learned, means the health care law could have as much to do with the health of your bank account as much as it does your insurance.

There is also a tax on homeowners who sell their homes and profit more than a half-million dollars. That additional profit could be taxed an additional 3.8 percent on top of other taxes.

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