Is the Patient Protection and Affordable Care Act (commonly called “Obamacare”) going to make a difference to you as an employer and a small business owner? Construction attorney and REMODELING columnist D.S. Berenson spoke with us about PPACA and a few ways in which it may have an impact:
Right now, Medicare is funded equally by you (the employer) at a rate of 1.45% of your employee’s wages and by your employee, who pays 1.45% of his or her wages into the fund. In 2013, the employee rate will rise by 0.9% to 2.35% on wages above $200,000 for individuals and $250,000 for married couples filing jointly. This new 0.9% tax only applies to wages in excess of $200,000 for individuals or $250,000 for married couples filing jointly.
Once an individual's wages surpass $200,000 in a calendar year, the 0.9% tax must be withheld. This is true even where the the wage earner may ultimately not be liable for this tax. For example, say a husband earns $210,000 in the calender year, but his wife, with whom he files jointly, earns $30,000. Their combined $240,000 of income is below the $250,000 threshold for married couples filing jointly. Nevertheless, the 0.9% tax will be withheld from the husband's excess wages, but credited against the total tax liability shown on his and his wife's income tax return at the end of the year.
Investment Income Taxed
Also in 2013, impacting you as a small business owner, there will be a Medicare contribution tax of 3.8% on net investment income if your adjusted gross income is $200,000 (or $250,000 combined couple income). Net investment income is money you might make from renting property you own, from dividends on stock you may own, or sales of any businesses you may own.
Finally, starting in 2014, if you employ 50 or more full-time workers, you must provide health insurance to your full-time employees and it must be “adequate" and "affordable” . “If it’s not "adequate" and "affordable” – which is subject to interpretation – you will pay an assessment of $3,000 for each employee for whom the insurance is not "adequate" and "affordable." If you choose to not provide any health insurance at all to your full-time employees, you will pay an assessment of $2,000 for each employee.
—Stacey Freed, senior editor, REMODELING.