New Jersey residents may not know that there are several new taxes going into effect on Jan. 1 that are designed to help pay for ObamaCare. One of these taxes has the unfortunate consequence of only applying to people making just over $53,000 and families making no more than $200,000 per year. For families with a large amount of medical bills, this new tax could give them the final push toward bankruptcy.
Under the current tax law, taxpayers may deduct unreimbursed out-of-pocket medical expenses that are not recoverable under any other tax free method. These other methods include, but are not limited to, such things as Flexible Spending Accounts, FSA, or Health Savings Accounts, HSA, or some sort of tax-free employer-provided care. The expenses are required to be 7.5 percent of the taxpayer’s adjusted gross income. That figure is then subtracted from the taxpayer’s adjusted gross income.
Under the new tax law going into effect on Jan. 1, 2013, the percentage is going to be raised to 10 percent. This could amount to a tax increase of approximately $200-$400 per year. The families this new tax will touch the most are those that may already be drowning in medical costs that are not reimbursable.
Medical bills that are not recurring and resulted from a catastrophic event such as an unexpected illness corrected by a significant hospital stay or an automobile accident can cripple a family financially through no fault of their own. For some New Jersey families, bankruptcy may be the best way not only get out from under a large amount of medical bills, but also to avoid a rise in their taxes. Filing for bankruptcy protection can give a family with a large amount of medical bills a fresh start.
Source: Americans for Tax Reform, “10 Million Middle Class Families Face ‘High Medical Bills Tax’ Under Obamacare,” Ryan Ellis, Dec. 13, 2012