The Affordable Care Act may affect your 2013 taxes but TaxACT can help.

Doctor and patients

The most significant implications of the Patient Protection and Affordable Care Act of 2010, also known as “Obamacare,” are just around the corner. In addition to having wide-ranging effects on health insurance in 2014 and 2015, the legislation also impacts income taxes.

“Though the Affordable Care Act has implications on income taxes, you can still act confidently when preparing your tax return with an online solution,” says TaxACT spokesperson Jessi Dolmage. “The question and answer interview will cover all the tax law changes.”

The health care act included several tax law changes for 2013 federal income tax returns due April 15, 2014:

  • Employees will report the total amount paid by them and their employer for health insurance premiums, flexible spending beyond payroll deductions and other premiums, on their returns. “The amount is needed for health insurance changes; it doesn't impact your taxable income,” explains Dolmage. “Simply enter the amount in Box 12 with Code DD on your Form W-2 when prompted by the tax program.”
  • If you itemize deductions, the threshold for deducting medical expenses increases to 10 percent of your adjusted gross income (AGI). The threshold for taxpayers age 65 and older remains at 7.5 percent. The tax software will calculate the deduction after you enter your medical expenses.
  • A 3.8 percent tax on net investment income will apply to taxpayers at higher income levels based on filing status. Individuals and heads of household with an AGI of $200,000 plus, married couples filing separately with an AGI of $125,000 plus, and couples filing jointly with an AGI of $250,000 plus must pay the tax. Answer a few questions about investment income and your tax program will do the rest.
  • Taxpayers in those same AGI ranges will also pay an additional 0.9 percent Medicare tax on wages and compensation in excess of $200,000. The tax is automatically withheld from employee wages, with the total amount provided in Box 6 of your Form W-2. If you're a business owner or self-employed, the tax is calculated using figures on your Schedule SE.

The health insurance requirement doesn't have tax implications for another year. If you have health insurance, your online tax solution will guide you through the simple process of reporting it on your 2014 tax return due April 2015. If you don't have health insurance for a total of three or more months in 2014, you may pay a penalty that's reported and calculated on your tax return. Tax programs will calculate the amount based on number of uninsured individuals in your household and household income.

Uninsured individuals can shop and apply for health insurance through online “marketplaces,” also called “exchanges,” starting Oct. 1. States will have their own marketplaces, use the federal government's Health Insurance Marketplace or a hybrid of the two. Enrollment closes March 31, 2014.

If you don't have access to minimum required employer-provided insurance and purchase insurance through a marketplace, you may qualify for an advanced premium tax credit applied directly to your monthly premiums. Eligibility and amount are based on the cost of marketplace premiums and your household size and income. If you do not take advantage of the advanced premium tax credit, you can still claim the refundable credit on your 2014 tax return. Cost-sharing subsidies may also be available for other health care expenses such as deductibles, copayments and coinsurance.

Whether you have a simple or complex situation, TaxACT makes it easy to navigate the tax implications of the Affordable Care Act anytime, anywhere. Prepare, print and e-file your federal taxes free at www.taxact.com/affordable-care-act. Visit the Health Insurance Marketplace for information about insurance options at www.healthcare.gov.

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Upcoming Tax Dates

April 10 (Employees who work for tips)
If you received $20 or more in tips during March, report them to your employer - Details

April 15 (Individuals)
File a 2013 income tax return (Form 1040, 1040A, or 1040EZ) and pay any tax due - Details

April 15 (Household Employers)
If you paid cash wages of $1,800 or more in 2013 to a household employee, you must file Schedule H - Details

April 15 (Individuals)
If you are not paying your 2014 income tax through withholding (or will not pay in enough tax during the year that way), pay the first installment of your 2014 estimated tax. Use Form 1040-ES - Details

April 15 (Partnerships)
File a 2013 calendar year return (Form 1065) - Details

April 15 (Partnerships)
Electing large partnerships: File a 2013 calendar year return (Form 1065-B) - Details

April 15 (Corporations)
Deposit the first installment of estimated income tax for 2014 - Details

April 16 (Everyone)
Federal Holiday (District of Columbia Emancipation Day) - Details

View More Tax Dates