Politics can often be a highly contentious issue. One area that has been especially touchy over the last few years has been that of health care. After the Affordable Care Act was passed during the Obama administration, the health care industry underwent some major changes. The current administration has made many statements concerning its intention to replace the Affordable Care Act with a new system. Although a new health care package has not been passed, in December 2017, a major tax overhaul was passed and subsequently signed into law by President Trump. The Tax Cut and Jobs Act contains sweeping changes that will effect most taxpayers. The Tax Cut and Jobs Act also has a significant impact on health care and its providers.
First, although the new tax bill does not repeal the Affordable Care Act outright, it does repeal the individual mandate. Under the Affordable Care Act, every person was required to carry health insurance or pay penalties for the failure to do so. The new tax law provides that as of 2019, individuals under the age of 65 will no longer be required to carry individual health insurance. This could carry major repercussions for health care providers, as fewer insured patients means an increased risk of not receiving payment for all services rendered, or the potential that certain patients will stop coming in at all, as they have elected to drop health insurance.
Primary care physicians who have independent practices could stand to benefit under the new law. The new law reduces the personal income tax rate for those who own pass-through entities such as sole proprietorships or partnerships. As many health care practices are organized with one of these devices, many small practices are likely to benefit. The tax bill states that the tax rate for these owners could drop from about forty percent to closer to thirty percent. In order to qualify for this tax break, a physician must earn no more than $415,000 per year if filing jointly with a spouse or $207,500 if filing single.
The medical expense deduction was retained by the new bill, but was modified. Under the new bill, the medical expense limit was reduced from ten percent of a household’s adjusted gross income to seven and a half percent for tax years 2017 and 2018. The intention of the change is to assist those with high cost medical conditions. This could result in an increase in patients and appointments for health care providers as their patients will be able to deduct more eligible medical expenses than in recent years.
Health care and taxes can be complicated. You need an experienced team to help you understand your rights and responsibilities. Call us today at 720-420-1777 for an appointment.