Expanded Medicare taxes and other changes make planning critical Presented by: > [Insert your logo here] Health care act TAX OVERVIEW – INDIVIDUALS

[Insert your logo here] 2 The agenda  The health care act’s tax impact on individuals o Medicare tax increase on earned income  Withholding issues  Minimizing the additional tax o New Medicare tax on investment income  Income subject to the NIIT  Income exclusions  Minimizing NIIT o Other changes:  Increased threshold for medical expense deduction  New FSA limit  Individual mandate

Additional Medicare tax now applies to higher-income earners MEDICARE TAX – EARNED INCOME

Medicare tax increases  FICA wages are subject to 2.9% Medicare tax o 1.45% paid by employer o 1.45% withheld from employee wages  Self-employed pay both portions, but they can deduct employer portion for income tax purposes  Starting in 2013, taxpayers with earned income over $200,000 per year must pay additional 0.9% Medicare tax on excess earnings o $250,000 for joint filers o $125,000 for married filing separately [Insert your logo here] 4

Withholding issues  0.9% Medicare tax doesn’t include a corresponding employer portion  Employers must withhold additional tax o Beginning in pay period in which wages exceed $200,000 for calendar year without regard to:  Employee’s filing status  His or her income from other sources o Employer could be required to withhold additional tax even if you don’t owe it [Insert your logo here] 5 TIP: You can’t ask your employer to stop withholding the tax, but you can claim a credit for it on your tax return.