Health Care Reform – Fact vs. Fiction

The health care reform legislation that passed earlier this year was incredibly broad in scope, so it’s probably not surprising that there’s a good deal of confusion, and a number of false or misleading claims being circulated.

Despite what you may have read, the new law does not:

  • Require you to be implanted with microchips
  • Empower 16,500 armed IRS agents to enforce
  • Create a private army for President Obama
  • Exempt House and Senate members

Although the list of misleading claims can continue for many pages, I would like to highlight the two claims that continue to be brought to our attention by our clients.

The claim: Beginning in 2011, you’ll be taxed on the value of your employer-provided health insurance

There are several e-mail campaigns making their way around right now claiming that, beginning in 2011, taxable income on Forms W-2 will be increased to reflect the value of employer-provided health insurance. A typical e-mail warns: “You will be required to pay taxes on a large sum of money that you have never seen… This is how the government is going to buy insurance for the 15% who don’t have insurance…”

The facts:

While it’s true that, beginning in 2011, this legislation requires employers to report the cost of employer-provided health care coverage on an employee’s Form W-2, the cost is included for informational purposes only. The amount reported is not included in income, and will not affect your tax liability.

The claim: Beginning in 2013, a new federal sales tax will apply to the sale of a home

The claim is that, beginning in 2013, all real estate sales will be subject to a new 3.8% federal sales tax. The e-mails making this claim generally contain some variation of the following: “Under the new health care bill, did you know that all real estate transactions are now subject to a 3.8% sales tax? The bulk of these new taxes don’t kick in until 2013 … If you sell your $400,000 home, there will be a $15,200 tax.”

The facts:

This claim, though inaccurate, has a basis in fact. There’s no federal sales tax being imposed on the sale of homes. But, beginning in 2013, the health care reform legislation does impose a new 3.8% Medicare contribution tax on the net investment income of high-income taxpayers (individuals with adjusted gross income (AGI) exceeding $200,000, and married couples filing joint returns with AGI exceeding $250,000). Net investment income will include gain on the sale of a principal residence only if the gain exceeds $250,000 for single taxpayers and $500,000 for joint taxpayers. That means that in most cases, at least where a principal residence is concerned, the 3.8% tax would kick in only if your AGI exceeds the threshold above, and only if profit on the sale of the home also exceeds its relevant threshold.

Rarely have we seen legislation so widely misrepresented and misunderstood as the new health care law. Misunderstandings are, for the most part, reasonable. After all, it took well over a year and a multitude of changes to reach the legislation’s final state. The misrepresentations, on the other hand, are largely driven to achieve political gain and are unacceptable behaviors exhibited by each political party.

If you have any questions about seemingly odd or unusual items related to this legislation that you may have heard, please contact us and we’ll provide you with the facts.

If you have any questions, please don’t hesitate to contact us. If you’re not currently a client, but would like to schedule an appointment, please contact Lisa Reynolds at (513) 792-6648 or [email protected].

Truepoint Wealth Counsel is a fee-only Registered Investment Adviser. Registration as an adviser does not connote a specific level of skill or training. More detail, including forms ADV Part 2A & 2B filed with the SEC, can be found at TruepointWealth.com. Neither the information, nor any opinion expressed, is to be construed as personalized investment, tax or legal advice. The accuracy and completeness of information presented from third-party sources cannot be guaranteed.

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