March 31, 2010 12:00 am

Congress Passes Health Care and Education Reconciliation Act of 2010

As a supplement to the Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010, Congress has made a few tweaks, including:

  • A tax of 3.8% of the lesser of the individual’s net investment income for the year or the amount the individual’s modified adjusted gross income exceeds a threshold amount. For individuals, the threshold amount is $200,000 ($250,000 for joint filers and $125,000 for married persons filing separately).
  • An excise tax starting in 2014 on individuals who fail to maintain “minimum essential coverage” of the greater of: (1) 2.5% of household income in excess of the taxpayer’s household income for the tax year over the threshold amount of income required for income tax return filing or (2) $695 per uninsured adult in the household. (Under the Patient Protection and Affordable Care Act, the amount of the penalty had been $750.) A higher penalty will be phased in from 2014 to 2016.
  • Change in the definition of dependent so that amounts received under a health insurance plan related to medical care of any child of the taxpayer who has not yet reached age 27 are excluded from income.
  • Higher threshold levels for a 40% excise tax on insurers offering so-called Cadillac plans.
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Tax Glossary

Market discount

The difference between face value of a bond and lower market price, attributable to rising interest rates. On a sale, gain on the bond is generally taxed as ordinary income to the extent of the discount.

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