Insurance

Federal Law Changes that Will Affect Your Tax Return – Part 1

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Was Obamacare really declared unconstitutional by the Supreme Court? Were the required minimum distributions (RMDs) at age 70 ½ from your retirement plan really eliminated? And how about the threshold for writing off medical expenses–was that also tossed away?

These are some of the questions people are asking in light of recent federal legislation. I’m going to answer these questions and clear up the misunderstandings most people have about the subjects in a 3-part series of blog posts.

Today, let’s talk about the Affordable Care Act (ACA)–what many people call “Obamacare.” The ACA contains a provision referred to as the individual mandate; this provision requires most Americans to purchase and keep in place a particular form of health insurance to avoid paying a tax (the individual shared responsibility payment) when they file their federal income tax returns.

In 2017, the Tax Cuts and Jobs Act (TCJA) reduced that tax to $0. Immediately after the TCJA went into effect, opponents of the ACA filed litigation, claiming the individual mandate was no longer constitutional. Their basis was the Supreme Court’s original ruling that the individual was constitutional because it contained a tax that met four requirements. Well, after the court case wended its way through the judicial system, the U.S. Fifth Circuit Court of Appeals agreed with those filing suit.

Specifically, the court ruled that the individual mandate was unconstitutional because it no longer contained a tax provision. Why? Because the individual shared responsibility payment no longer produced income to the federal government, was no longer paid by taxpayers, could no longer be determined by a taxpayer’s tax return, and was no longer enforced or collected by the IRS.

As of this writing, you will not be charged a tax if you didn’t have health insurance last year. And it’s looking like that is how it will be moving forward–at least with respect to the tax.

With respect to the rest of the ACA’s provisions, that’s anyone’s guess. Part of the case heard by the court of appeals related to whether the individual mandate could be severed from the ACA. Some want to strike the entire ACA unconstitutional because that was the fate of the individual mandate. However, the federal court has sent that portion of the case back to the district court for review. The Supreme Court just recently rejected a recent request for the process to be accelerated, so many believe the issue won’t be resolved until the fall of this year.

Check back tomorrow for the second part of this series: required minimum distributions (RMDs) and the age 70 1/2 threshold.

 

Want to Join a Lunch and Learn?

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Check out a recent blog post written by my associate, Pam Reihs of A.D. Banker & Company. She describes the monthly Lunch and Learn webcasts she and I co-host about the most current topics affecting the insurance industry.

These webcasts are free, and they always fill up, so visit Pam’s blog post ASAP, where you can register to reserve your seat.

 

Update: Health Insurance and the Individual Mandate

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When the Affordable Care Act (i.e., the ACA or ObamaCare) was originally enacted in 2010, a number of lawsuits were filed contesting its constitutionality. Many people were opposed to the federal government stipulating that most Americans had to be covered by a specific form of health insurance or be fined. (The ACA also required large employers to offer a specific form of health insurance to a certain percentage of full-time employees or be fined.)

The Individual Mandate is the ACA provision requiring individuals to be covered by health insurance that meets specific requirements of federal law to avoid paying a penalty. Technically, the monetary penalty was ruled a tax imposed by Congress and, therefore, the Individual Mandate was deemed constitutional by the Supreme Court.

In 2017, the Tax Cuts and Jobs Act reduced the Individual Mandate’s tax penalty to $0. This meant that beginning January 1, 2019, Americans were no longer taxed if they were not covered by federally mandated health insurance. As one would expect, that law also spurred litigation.

Last month, a federal Appeals Court ruled that because the Individual Mandate’s tax penalty was reduced to $0, it could no longer be considered a tax based on the criteria established by the Supreme Court in earlier legislation. Since the Individual Mandate no longer contains a tax, it is no longer constitutional.

While this decision might seem to indicate that everyone’s health insurance options will change this year, that is not the case. Why? Because another portion of the lawsuit heard by the Appeals Court was deferred until the lower court can study all the provisions in the ACA to determine which of them Congress intended to be severable from the rest of the ACA. In other words, just because the Individual Mandate is unconstitutional doesn’t mean all provisions of the ACA are, as well.

A complete review of the entire ACA will take months and months of time. Then, when the lower court submits its study to the Appeals Court, the ensuing judicial process can also be expected to take months. For the time being, our health insurance options should remain pretty stable, with the additional options offered by other recent federal legislation: the availability of Short-term Limited Duration Insurance (STLDI) and high-benefit, low-deductible health insurance plans (i.e., Cadillac plans). Note: the 40% tax on Cadillac plans was permanently repealed effective January 1, 2020 under the Further Consolidated Appropriations Act of 2020 (H.R. 1865).

Stay tuned for more info as it becomes available…

 

10 Toughest State Laws re: Texting and Driving

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Texting is a form of risky, or distracted driving. Experts say that when you’re sending or receiving a text, the average length of time your eyes are off the road is 5 seconds.

Five seconds doesn’t sound like a long time. And maybe it isn’t. But taking your eyes off the road for 5 seconds while you text is the equivalent of driving your car at 55 mph, the entire length of a football field … blindfolded!

The National Highway Traffic Safety Administration (NHTSA) has a webpage devoted to Risky Driving, just in case you’re interested in statistics about any of the following activities: distracted driving, drowsy driving, speeding, seat belt use, or driving while under the influence of drugs or alcohol.

Here’s a link to a recent article that lists the 10 states with the toughest texting while driving laws: https://bit.ly/38BqlNg

 

Drones: Do You Know the New Rules?

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If you own a drone, you should know the FAA has rules and regulations that require virtually all drones to be registered. Regardless of whether your drone needs to be registered, it needs to comply with regulations concerning flight in the National Airspace System.

Are you flying a drone for recreational purposes? As a modeler? For business? Everything you need to know about drone registration and requirements can be found on the FAA’s website by clicking here. Keep in mind that rules have been changing rapidly.

In fact, one of the most recent rule changes relates to ADS-B technology. Automatic Dependent Surveillance-Broadcast systems use GPS, avionics, and a network of ground stations to more accurately position aircraft while in flight. It also provides a larger coverage are than radar does. Beginning January 1, 2020, all aircraft flying in most controlled airspace is required to be equipped with ADS-B technology. For more information about that, click here.

If you fly a drone, you should make sure you’ve checked with your homeowners’ or business insurance carrier to make sure you policy provides the liability coverage you need. Although your policy may provide property coverage for your drone, it will NOT provide coverage for any drone used in business unless you have purchased it. In addition some business owners will find that their carriers have added liability exclusions for drones.