How Obama’s Healthcare Plan Affects Your Taxes in 2024

Last updated on November 16, 2024

The Affordable Care Act (ACA), often called “Obamacare,” introduced several relevant healthcare-related tax provisions in 2024. Some of these measures impact how individuals and businesses handle taxes, particularly with premium tax credits, healthcare coverage, and taxes for high earners. Here’s a detailed breakdown of how the ACA influences your taxes in 2024 and what to expect.

1. Premium Tax Credits and Your Tax Return

If you purchased health insurance through the Health Insurance Marketplace, you might be eligible for the Premium Tax Credit (PTC). This refundable tax credit is designed to help lower-income and middle-income households afford health insurance premiums.

• Reconciliation of Credits: When filing your 2024 taxes, you must reconcile any advance payments you received during the year with the credit amount you qualify for based on your final income. If you received too much credit, the difference must be repaid. Conversely, if you used less, you will receive the balance as a tax refund or credit against taxes owed.
• New Limits for 2024: As per IRS guidelines, the required contribution percentage in 2024 has decreased to 8.39%, meaning that health coverage becomes affordable at a lower income threshold than in prior years. This adjustment makes more people eligible for tax credits and may reduce out-of-pocket insurance coverage costs through ACA marketplaces.
• Essential Forms: To complete this process, taxpayers must file Form 8962 alongside their federal return, with information from Form 1095-A, which the Marketplace issued early in 2024.

2. Employer-Related Mandates and Taxes

The ACA mandates employers with 50 or more employees to offer affordable health coverage. If they fail to do so, they are subject to penalties known as the Employer Mandate Tax. In 2024, businesses must continue complying with these rules to avoid penalties established to encourage widespread access to healthcare coverage.

The ACA provides tax credits for smaller businesses that offer health insurance to their employees. However, the credit is only available for two years and applies to companies with fewer than 25 employees earning an average wage below $50,000.

3. Impact on High-Income Taxpayers

To finance the ACA, additional taxes were imposed on high-income earners:

• 0.9% Medicare Tax: This tax applies to individuals earning over $200,000 (or $250,000 for couples filing jointly).
• 3.8% Net Investment Income Tax (NIIT): Applicable to income from interest, dividends, capital gains, and rental properties for individuals and couples above the same income thresholds.

These taxes will remain unchanged in 2024 and play a crucial role in funding Medicare and other ACA provisions.

4. Repealed Taxes and Updates

Some ACA taxes, such as the individual mandate penalty and the Cadillac tax on high-value insurance plans, were eliminated in prior years. The Tax Cuts and Jobs Act repealed the individual mandate in 2017, so there will no longer be a federal penalty for not having health insurance in 2024. Other excise taxes on medical devices and health insurers have also been repealed, reducing burdens on businesses but impacting federal revenues.

5. State-Specific Mandates and Exceptions

While the federal individual mandate no longer applies, some states have implemented their mandates requiring residents to maintain health insurance coverage or face state-level penalties. Taxpayers in such states should be mindful of these rules when filing state taxes.

Conclusion

In 2024, Obamacare continues influencing individual and business taxes through premium tax credits, employer mandates, and high-income surcharges. Understanding these provisions is crucial to navigating your tax filing successfully. Taxpayers should ensure compliance with ACA requirements, particularly those related to premium tax credit reconciliation, to avoid unexpected tax liabilities.

For more details and accurate filing assistance, refer to the official IRS website and healthcare marketplace resources.

Sources

• IRS Guidelines on ACA Tax Implications
• Healthcare Marketplace and Tax Credit Info
• Premium Tax Credit Calculations for 2024: CPA Practice Advisor