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2 Obamacare Taxes to Watch Out for Right Now

For many, the first sign that The Patient Protection and Affordable Care Act, also known as Obamacare, had taken effect came in October, when health-insurance exchanges rolled out for the first time. But two tax provisions linked to Obamacare have been in effect since January, and they could make a big impression on your tax return.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, discusses two of the taxes that were included in provisions of the Affordable Care Act. He explains how one imposes an extra 0.9 percentage-point tax on Medicare withholding for certain high-income taxpayers, and how because of the special mechanics of how the tax is imposed, you might have to report it on your tax return rather than having had it withheld from your paychecks during the year. Second, a new net investment income tax of 3.8% applies to investment income for the same high-income taxpayers, defined as single filers with more than $200,000 in income or joint filers with more than $250,000 in income.

Dan points out that while the wage tax is one that most people can't avoid, there are steps you can take to reduce taxable income. By using ETFs like iSharse National AMT-Free Muni (NYSEMKT: MUB  ) , SPDR Nuveen Muni (NYSEMKT: TFI  ) , and PIMCO Intermediate Muni (NYSEMKT: MUNI  ) , investors can shelter at least part of their investment income from the new Obamacare tax.

Learn more about Obamacare taxes
Obamacare was controversial from the time it became law, in large part because it has so many hard-to-understand provisions. But in only minutes, you can learn the critical facts you need to know in a special free report called "Everything You Need to Know About Obamacare." But don't hesitate; because it's not often that we release a FREE guide containing this much information and money-making advice. Please click here to access your free copy.


Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 29, 2013, at 3:44 PM, Gman wrote:

    Obama when do you plan on telling the American Public about this? “While appearing on Newsmax TV's "Steve Malzberg Show" on Monday, November 26, 2013 . Time magazine’s senior political analyst Mark Halpern admitted that death panel are built into Obamacare and will be the mechanism used to control costs, Halperin went so far as to say that rationing is "going to be a huge issue," Stating it is "something else about which the President was not fully forthcoming and straightforward." With this clause in Obama Care the Government has taken the Life or Death decision out of the hands of the patient or family and put it squarely in the hands of the Government. This clause potentially exposes the patient or their families to hundreds of thousands of Dollars of “Life Ending Care Expenses”

  • Report this Comment On November 30, 2013, at 12:00 AM, jaypay1780 wrote:

    Well most people don't make that much money anyway so who cares if the rich get taxed more. Now if these taxes hit the poor and middle wage people then we have a problem.

  • Report this Comment On November 30, 2013, at 10:38 AM, kimlo53 wrote:

    jaypal1780- Why can't you understand that this is the way to have socialism. The rich are the ones that keep this country going. The rich businessman passes this tax on to the consumer in the form of higher prices. I'm sick of the class ware crap. Without the rich, what is the incentive to succeed in life if you are always penalized. Why succeed if you don't need to work and get all the freebies. Without the rich, there isn't a tax revenue. Obama is an elitist. He wants the elitists and the poor. Obamacare is his way to achieve it. You're an idiot.

  • Report this Comment On November 30, 2013, at 7:34 PM, TaxPrepGuy wrote:

    Jaypay1780, you said "Now if these taxes hit the poor and middle wage people then we have a problem." The ACA has a third tax increase, namely that medical expenses are now deductible only above 10% of gross income rather than the 7.5% threshold that obtained before. This means that millions of middle class families who itemize, as well as huge numbers of lower middle income seniors whose biggest tax deduction is their medical expenses, just got hit with a federal tax increase and, if they live in a state that figures state income tax on federal numbers after deductions, a state income tax increase as well. That starts with 2013 for non-seniors and is phased in over the next few years for seniors.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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