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HOUSE PASSES AMERICAN HEALTH CARE ACT CLEARING PATH FOR TAX REFORM

Yesterday, the House of Representatives passed the American Health Care Act (ACHA) in a narrow vote of 217 to 213 after the bill had been amended from its previous version proposed a few weeks earlier. The ACHA is new proposed legislation that will repeal and replace parts of the Affordable Care Act (ACA) which is currently the law of the land. While this is only the first step of the new legislation, here are a few of the highlights contained in this new bill.

What is repealed:

Individual mandate - effective 2016
Employer mandate - effective 2016
Income based subsidies - effective 2020
Net investment tax (3.8% on passive income)
10% floor on medical in itemized deductions (reduces to 5.8% floor)
"Cadillac tax" delayed until 2026
Medical device tax
Small employer health insurance credit effective 2020
Exclusion from over the counter medication from FSAs and HSAs - effective 2017
Other smaller tax type provisions originally imposed by ACA

What is replaced:

Gives states the ability to define essential coverage (through waivers) and encourage fair health insurance premiums by allowing states to establish "high risk pools" and apply for waivers from federal standards in an effort to lower premiums and expand the number of insured
Refundable tax credit for individuals carrying coverage based on age (phased out based on income)

Starting at a $2,000 credit for those under 30 and,
Ending at a $4,000 credit for 60 and older

30% premium increase for individuals for one year for those whom have not maintained coverage over the previous year (can't come and go) - effective 2019
HSA and FSA enhancements

What stays:

Coverage for children up to age 26
Maintains pre-existing conditions but could be tied to "high risk pools"
Guarantee of ability and renewal of coverage
Keeps the additional .09% Medicare surtax on earned income over (200k single and 250k joint) until 2022

The ACHA now moves to the Senate where most likely there will be some changes and negotiations with the House before a bill is finalized and sent to the President for signature. Until that time, the current Affordable Care Act is still law, and employers and individuals alike must adhere to the rules and regulations currently in effect.

The passage of the AHCA could have a large impact on the tax reform as well. It has been reported that potential savings from the AHCA would help fund a more robust tax reform package.

To answer questions surrounding the current ACA rules or discuss long-term tax strategies for the proposed legislation, contact your professional at UHY LLP in Detroit 313 964 1040, Farmington Hills 248 355 1040 or Sterling Heights 586 254 1040.

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Our firm provides the information in this newsletter as tax information and general business or economic information or analysis for educational purposes, and none of the information contained herein is intended to serve as a solicitation of any service or product. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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