March 22, 2010 / 9:51 PM / 8 years ago

FACTBOX-Major tax provisions in U.S. healthcare bill

March 22 (Reuters) - The U.S. healthcare overhaul that President Barack Obama is expected to sign into law contains about $438 billion in revenue increases over the next decade.

Here is a summary of major revenue provisions in the legislation, including modifications passed by the House of Representatives that the Senate is expected to act on this week.

MEDICARE TAX INCREASE

* The biggest revenue raiser in the healthcare package is an increase in the Medicare payroll tax by 0.9 percent on incomes over $200,000 for individuals and $250,000 for couples filing jointly starting in 2013.

That higher income group also would pay a new 3.8 percent tax on income from investments including capital gains, dividends and interest starting in 2013.

Coupled with the scheduled expiration of President George W. Bush’s tax cuts at the end of 2010, the Medicare tax would bring the top tax rate on capital gains to 23.8 percent in 2013.

Under current law, the top rate on capital gains jumps to 20 percent from 15 percent in January. If Congress fails to act on Bush’s expiring tax breaks, the dividends, currently taxed at a top rate of 15 percent, will be taxed as ordinary income, with the top rate scheduled to rise to 39.6 percent from 35 percent.

That means the tax on dividends could go as high as 43.4 percent when the new Medicare tax goes into effect in 2013. But Obama has proposed a top dividend tax rate of 20 percent. If Congress enacts Obama’s proposal, the top tax rate for dividends would rise to 23.8 percent in 2013.

The Medicare tax increase in the healthcare bill would raise an estimated $210.2 billion over 10 years, according to estimates by the congressional Joint Committee on Taxation.

EXCISE TAX ON “CADILLAC” HEALTH PLANS

* A new 40 percent excise tax on high-cost health plans goes into effect in 2018 and would raise an estimated $32 billion the first two years it is in effect.

The tax would be imposed on the value of health plans in excess of $10,200 for individuals and $27,500 for families. The tax threshold for plans covering early retirees or people in high-risk professions is $1,650 higher for individuals and $3,450 higher for families. Higher tax thresholds are also allowed for employer-provided plans covering mostly women or older workers.

HEALTH INDUSTRY FEES AND EXCISE TAXES

* Pharmaceutical manufacturers and importers are to pay an annual fee based on their market share starting in 2011. The fee would raise $27 billion through 2019.

* A 2.3 percent excise tax on the sale of medical devices goes into effect on Jan. 1, 2013. That tax, which excludes items sold at retail to consumers, would raise $20 billion through 2019.

* Health insurers are to pay an annual fee based on their market share starting in 2014. The fee would raise $60 billion through 2019.

* A 10 percent excise tax on indoor tanning services goes into effect in July 2010.

MEDICAL EXPENSE DEDUCTIONS

* The bill will limit the deduction on medical expenses to amounts above 10 percent of income starting in 2013. Currently, the deduction floor is 7.5 percent of income. The floor will remain at 7.5 percent for taxpayers 65 years and older.

This change is estimated to raise $15 billion through 2019. (Reporting by Donna Smith; Editing by David Alexander and Peter Cooney)

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