Another hidden Obamacare tax

Tom Trinko
For a number of years American companies have been able to set up Flexible Spending Accounts(FSA) which allow workers to put aside money to deal with medical expenses not covered by their insurance-such as deductibles.

The advantage of these accounts is that the employee did not pay payroll taxes on the money; the disadvantage was that if the money was not used it was lost.


These plans were an attempt to get back to the original intent of income tax, which was not to tax the money needed to pay for the necessities of life.


Obamacare however has severely limited these accounts by changing the maximum contribution from roughly $5000/year to $2500/year.

For those with significant medical expenses this change is a major tax increase.  Essentially employees will now be required to pay taxes on as much as an extra $2500 each year while their medical expenses continue to grow.

The increase in taxes to individuals due to social security taxes and Medicare taxes is $191.25; at a combined rate of 7.65%.

The extra amount that people will have to pay for Federal Income taxes will vary based on their marginal tax rates. For a family making $40K/year the marginal rate in January 2013 will be 28%. That means that the Obamacare cut in FSA contributions would lead to a tax increase of $700.

A typical middle income family with uncovered medical expenses stands to pay nearly $900 a year more under this little publicized aspect of Obamacare.  While that is not a large amount compared to the other tax increases that are part of Obamacare it will be a significant impact to Americans struggling with high medical costs.


You can find more of Tom's rants here


For a number of years American companies have been able to set up Flexible Spending Accounts(FSA) which allow workers to put aside money to deal with medical expenses not covered by their insurance-such as deductibles.

The advantage of these accounts is that the employee did not pay payroll taxes on the money; the disadvantage was that if the money was not used it was lost.


These plans were an attempt to get back to the original intent of income tax, which was not to tax the money needed to pay for the necessities of life.


Obamacare however has severely limited these accounts by changing the maximum contribution from roughly $5000/year to $2500/year.

For those with significant medical expenses this change is a major tax increase.  Essentially employees will now be required to pay taxes on as much as an extra $2500 each year while their medical expenses continue to grow.

The increase in taxes to individuals due to social security taxes and Medicare taxes is $191.25; at a combined rate of 7.65%.

The extra amount that people will have to pay for Federal Income taxes will vary based on their marginal tax rates. For a family making $40K/year the marginal rate in January 2013 will be 28%. That means that the Obamacare cut in FSA contributions would lead to a tax increase of $700.

A typical middle income family with uncovered medical expenses stands to pay nearly $900 a year more under this little publicized aspect of Obamacare.  While that is not a large amount compared to the other tax increases that are part of Obamacare it will be a significant impact to Americans struggling with high medical costs.


You can find more of Tom's rants here