What You Need to Know About Obamacare and Your Tax Returns

The Affordable Care Act (ACA), commonly known as "Obamacare", requires all U.S. citizens and legal residents to enroll in health insurance. The effects of the Obamacare program on American society is plain to see, but what about the potential effects on your taxes? Below are three of the most common ways the Affordable Care Act can affect your tax returns.

1. If you are penalized for failure to enroll in a health insurance plan, the penalty will be subtracted from your tax return. Generally speaking, the penalty is calculated by taking the higher of two calculations - either the penalty is $95 per adult in the household and $47.50 per child in the household or it is 1% of the family's overall household income. The IRS will use whichever formula produces a higher number to calculate your penalty.

2. Families are able to qualify for financial aid in order to purchase their health insurance, though their household incomes first must meet federal poverty level. If your family qualifies for financial aid, you will receive the funds through a tax credit. This refundable tax credit is called a "premium assistance credit" and is variable based on family income.

3. You can receive an advance subsidy in order to reduce your health insurance premiums. However, the subsidy is based on your estimated income, so be careful when you calculate your estimate. If your estimated income results in a larger subsidy than your actual credit, the difference will be collected through your tax return.

What Employers Should Know about DOMA

The June 26, 2013 Supreme Court decision to end the Defense of Marriage Act (commonly known as DOMA) means many employers have a new set of responsibilities.

Under the FMLA: 
The U.S. Department of Labor has traditionally held that same-sex couples were not entitled to FMLA benefits because the partners in these couples did not fit the legal definition of a "spouse". As of August 2013, same-sex couples who reside in states where same-sex marriage is legal are now entitled to full FMLA benefits.

Under your company Benefit Plan:
Before the end of DOMA, employer-provided health benefits were calculated as income for same-sex couples because the partners of these couples did not fit the the legal definition of a "spouse" for the federal exemption from income tax for health benefits provided to a spouse. Now, same-sex couples will not longer be federally taxed on the value of their employer-provided health coverage, regardless of what state they reside in.

The end of the Defense of Marriage Act signifies a major change in our society and therefore in law. It is important for employers to stay up to date on what their obligations and responsibilities under the new law. It is wise to contact an attorney who is well versed in employment law if you have any questions or concerns.