What Would the Repeal of Obamacare mean for Taxpayers?
In a nutshell, the House Republicans’ Obamacare Repeal and Replacement plan would cut taxes on the wealthy by hundreds of billions of dollars. The plan would, among other things, do away with the 3.8% investment tax that was used to help finance the health care law, as well as a 0.9 percent surcharge on salaries above $250,000.
Below is a brief summary of other tax implications the Repeal and Replacement plan calls for:
Almost all Obamacare taxes repealed. The bill repeals nearly all Obamacare taxes starting in 2018. The biggest to consider are the 3.8 percentage point Medicare payroll tax bracket, the 3.8 percent surtax on savers, the “high medical bills tax,” the “medicine cabinet tax,” multiple tax increases on health savings accounts (HSAs) and flexible spending accounts (FSAs), the medical device tax, and other tax increases on various health industries.
Individual mandate and employer mandate retroactively repealed. These two Obamacare taxes will be zeroed out and retroactively applied to 2016 onward. If necessary, families and businesses will be able to file amended returns to get their penalty taxes back.
“Cadillac plan” tax deferred until 2025. The most significant Obamacare tax not repealed is the 40 percent excise tax on high cost, employer provided health insurance plans (“Cadillac plans”). The tax on these plans was already delayed by the permanent extenders bill, and is delayed further here.
New tax credit to purchase health insurance. Starting in 2020, those not offered health insurance at work or eligible for government health insurance (Medicare or Medicaid) will have the ability to use a new advanceable/refundable healthcare tax credit. This is only available to citizens and green card residents.
HSAs Greatly Expanded. The House bill greatly expands HSAs starting in 2018 in three ways. First, the contribution limit is nearly doubled from about $6500 today for a family to about $13,000 (half these figures for individuals). That means that HSAs will become a powerful new financial savings vehicle to rival 401(k)s and IRAs. Second, the bill allows spouses to make over age 50 “catch up” contributions to the same HSA. Finally, the bill allows HSAs to pay for certain medical expenses incurred before the HSA was established.