J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

28.4 Additional Medicare Taxes Take Effect in 2013

The Supreme Court decision upholding the constitutionality of the tax provisions in the 2010 Patient Protection and Affordable Care Act allows several tax changes to take effect as scheduled on January 1, 2013. There has been political opposition to the additional Medicare taxes discussed below and the itemized deduction and FSA changes noted in the Law Alert on this page, and there may be efforts to repeal them following the 2012 elections. See the e-Supplement jklasser.com for further details and developments.

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Law Alert

2013 Changes to Medical Expenses and FSAs

The 2010 Patient Protection and Affordable Care Act raises the medical expense deduction floor and restricts the amount that can be contributed to a health care flexible spending account.

The current 7.5% AGI floor for deducting medical expenses will rise to 10% in 2013. However, those age 65 and older can continue to use the 7.5% floor until 2017 (17.1).

For 2012 and prior years, companies set the limits on employee salary-reduction contributions to health care flexible spending accounts (FSAs). Starting in 2013, the law limits an employee’s FSA contributions to $2,500. For years after 2013, the $2,500 limit will be subject to inflation adjustments (3.16).

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Additional 0.9% Medicare tax on earnings.

Whether you are an employee ...