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Friday, November 5, 2010

Expert Q&A: What's this about taxes?

Many of you have sent in questions about how the new health care law will affect you and your family. We’ve compiled answers for select questions to our experts in a short series to help you navigate changes to the health care system. Here's the latest:     

Question: I have heard that beginning in January 2011, I will have to pay taxes on my family’s health insurance, which I now obtain tax-free through my employer. My family and I are proud to pay our fair share of taxes, but our budget is already tight and we have little money to spare. Will we face new taxes on our health insurance in January?

Answer: No. The Patient Protection and Affordable Care Act does not require everyone to pay new taxes on their health insurance. And there will not be any new taxes on health insurance benefits starting in January 2011.

What may start for the 2011 tax year, depending on your employer, is a provision in the Affordable Care Act that allows workers to see how much their employer-based health insurance costs. Under this provision, your W2 tax form will show how much your health plan cost in the previous year. However, this is for informational purposes only—it has no impact on the amount of taxes you’ll pay. Employers are required to include health plan cost information on W2 forms by the 2012 tax year, meaning that you will see your 2012 health coverage costs when you get your W2 form in January 2013. However, many employers may start this practice for the 2011 tax year, so health insurance cost information could be on the W2 forms that workers receive in early 2012.

The Affordable Care Act brings a host of new protections to people who have coverage now, along with many new coverage options for people who are uninsured or are currently insured with coverage that doesn’t meet their needs. The new law doesn’t increase taxes on middle-class families or small businesses but instead it actually offers them tax relief through credits to make coverage affordable. To learn more, visit