No legal news item last week was bigger than the U.S. Supreme Court’s decision to uphold virtually the entirety of the Affordable Care Act (so-called “Obamacare”). In a move that surprised many observers, in a 5-4 decision the Court deemed the controversial “individual mandate” portion of the measure constitutional on grounds that it constituted a tax. While the court held that the Congress could not pass the law pursuant to its power to regulate interstate commerce, it did find it a permissible use of the legislature’s taxing power.
Now that the matter is reasonably settled, local residents may be wondering how the law affects their New York elder law estate planning, if at all. A recent Smart Money story talked about some of these issues, explaining how certain tax matters will indeed change in the upcoming year as a result of the decision.
A few select rates will change next year. For example, an extra .9% Medicare tax increase will start for various individuals making over $200,000 or $250,000. In addition, some investment income (long-term capital gains and dividends) may face a 3.8% “Medicare contribution tax.” This is in addition to the rising rates if the “Bush tax cuts” expire without renewal.
Starting in 2013 a cap will be added on contributions to a healthcare “flexible spending account” (FSA) plan. Right now, there is no cap, and so an unlimited amount of money can be contributed to the plan which is then subtracted from taxable income. The money can be used to reimburse qualified medical expenses. Starting next year, contributions to those plans will be capped at $2,500. Similarly, itemized deductions for medical expenses will now apply only to expenses that exceed 10% of annual gross income (up from the current 7.5%).
However, it is important to keep these tax issues in perspective, because they represent just a part of the bill. The overall goal, of course, is to provide comprehensive health insurance for more Americans so that overall expenditures go down while quality of care goes up. Our New York estate planning attorneys appreciate that the long-term effect of these sweeping changes will not be fully fleshed out for years to come.
While the high-profile and controversial nature of the law may suggest that many things will change for all residents once it is fully in effect, the truth may be a bit less dramatic for many local families. Elder law estate planning issues will remain largely the same–ensuring proper legal documents are in place and examining all available avenues to ensure proper long-term care is available when needed.
See Our Related Blog Posts: