2016 Tax Increases Due To Obamacare-Fiction!
Summary of eRumor:
Emails warning about new tax increases taking effect on January 1, 2016, because of Obamacare have flooded inboxes and stirred panic among taxpayers.
The Truth:
Claims about 2016 tax increases due to the Affordable Care Act (commonly known as Obamacare) are mostly fiction.
An outdated and incorrect chain email that makes the rounds every January has widely circulated yet again in 2016. The email makes a number of claims about Medicare and capital gains taxes going into effect on January 1, 2016, to help fund Obamacare.
We investigated those claims in 2015, and found them to be false and misleading. You can read our full coverage here. Otherwise, here’s a brief overview of each claim, and tax rates you can expect to pay in 2016:
- Top Medicare tax went from 1.45% to 2.35%: Most taxpayers will pay 1.45% in Medicare tax in 2016. Top earners ($125,000 individual/$250,000 couple) will pay a 0.9% surcharge, bringing the top Medicare tax to 2.35%, which has remained unchanged from 2013.
- Top income tax bracket went from 35% to 39.6%: The top income tax bracket in 2016 ($415,000 individual/$466,950 couple) will be 39.6%, the same as in 2013, 2014 and 2015. The rate was increased under the bipartisan American Tax Payer Relief Act of 2012, not Obamacare.
- Top income payroll tax went from 37.4% to 52.2%: The Affordable Care Act set the top income payroll tax at 42.5% effective January 2013; however, that rate does not reflect additional state payroll taxes.
- Capital Gains taxes went from 15% to 28%: The maximum net capital gain tax rate is 20% in 2016, but most taxpayers pay less than that. However, a 25-28% tax rate does apply to certain types of capital gains, the IRS reports.
- Estate taxes went from 0 to 55%: Overall, estate tax rates have decreased over the last 15 years (the rate was 55% in 2001, and it was set at 40% in 2013). Estates of those who die in 2016 will have a basic exclusion amount of $5.450 million, up from the $5.430 million exclusion in 2015. The basic exclusion is the amount an individual can leave to heirs without paying federal estate taxes.
One 2016 tax increase under Obamacare that is not included on this list is the individual mandate excise tax rate. Those who do not purchase a “qualifying” health insurance policy must pay it. The rate increased to 2.5% of adjusted gross income in 2016, up from 2% in 2015 and 1% in 2014, according to Americans for Tax Reform.
The only tax levied under the Affordable Care Act that has not yet taken effect is the excise tax on comprehensive health insurance plans, otherwise known as the tax on “Cadillac” health insurance plans. That’s set to take effect in January 2018. Be leery of any warnings about “new” taxes because of the Affordable Care Act before that.