November 4, 2010

Health Care Reform – Fact vs. Fiction

richardBy Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

There are several e-mail campaigns making their way around right now claiming that, beginning in 2011, taxable income on Forms W-2 will be increased to reflect the value of employer-provided health insurance. A typical e-mail warns: “You will be required to pay taxes on a large sum of money that you have never seen. Take your last tax form and see what $15,000 or $20,000 additional gross does to your tax debt. That’s what you’ll pay next year. For many it also puts you into a new higher bracket so it’s even worse. This is how the government is going to buy insurance for the 15% who don’t have insurance and it’s only part of the tax increases.”

The claim: Beginning in 2011, you’ll be taxed on the value of your employer-provided health insurance.

The facts: While it’s true that, beginning in 2011, the health-care reform legislation requires employers to begin reportingthe cost of employer-provided health-care coverage on an employee’s Form W-2, the cost is included for informational purposes only, to show employees the value of their health-care benefits. The amount reported is not included in income, and will not affect your tax liability.

The claim: Beginning in 2013, a new federal sales tax will apply to the sale of a home The claim is that, beginning in 2013, all real estate sales will be subject to a new 3.8% federal sales tax. The emails making this claim generally contain some variation of the following text: “Under the new health-care bill–did you know that all real estate transactions are now subject to a 3.8% sales tax? The bulk of these new taxes don’t kick in until 2013 … If you sell your $400,000 home, there will be a $15,200 tax.”

The facts: This claim, though inaccurate, has a basis in fact. There’s no federal sales tax being imposed on the sale of homes. But, beginning in 2013, the health-care reform legislation does impose a new 3.8% Medicare contribution tax on the net investment income of high-income taxpayers (individuals with adjusted gross income (AGI) exceeding $200,000, and married couples filing joint returns with AGI exceeding $250,000). Net investment income will include gain on the sale of a home. However, the tax will not apply to any gain from the sale of a principal residence that is excluded from income (individuals, if they qualify, can generally exclude the first $250,000 in gain from the sale of a principal residence; married couples filing joint returns can generally exclude up to $500,000). That means that in most cases, at least where a principal residence is concerned, the 3.8% tax would kick in only if your AGI exceeds the threshold above, and only if profit on the sale of the home exceeds $250,000 ($500,000 for married couples filing jointly).

Remaining Supply of Discount Prescription Cards Available: Many of you called concerning the discount prescription card we referenced last month. We still have a supply of cards available. If you are on Medicare and are experiencing a ‘donut hole’ or ‘gap’ with your Prescription Drug Program, these discount cards may be helpful. This discount card is available at no cost. I understand it can be used by anyone – one card is sufficient for spouses or for the entire family. If you would like to have one of these cards, contact us at 563.332.2200 or email We will be happy to get one to you.