IRS Sheds Some Light on the Premium Tax Credit Enacted as Part of PPACA

[Editor’s Note] I started my career as a CPA specializing in taxes back in 1987, and right off the bat had to deal with the massive Tax Reform Act of 1986. Since that complicated set of tax rules was implemented more than 25 years ago, all I’ve seen is more and more complex tax rules enacted at an increasingly quick rate. Whether you’re a taxpayer or a tax advisor, there is barely even enough time to digest one set of rules before the next set is forced upon us. To make things more challenging, none of the old rules ever seem to be taken away as these new rules are enacted.

Well, the Affordable Care Act gives us all a bunch of new rules affecting our taxes, including a new Health Insurance Premium Tax Credit. Check out these Questions and Answers on the Premium Tax Credit provided by our friends at the IRS.

IRS Delays Tax Season

The IRS has announced it will delay the start of tax season due to the Federal government shut-down.? The agency needs adequate time to program and test tax processing systems prior to the start of next tax season.

The earliest individual tax returns will be accepted is now January 28, 2014.? The filing deadline remains the same as April 15, 2014.

For more info, you can read the IRS press release here.

Now’s the time for Mid-Year Projections

Now’s the time to get a Mid-Year Tax Projection to see how you’ll do on April 15 next year.

If you have self-employment income, made a job change during the year, have multiple sources of income, or just want to see where you stand tax-wise, our Mid-Year Tax Projection Service will help!

We’ll calculate a mid-year projection and give you advice on what you can do for the rest of 2013 to reduce your tax burden on April 15 (a nominal fee is charged for this service).

You can download our Tax Projection Worksheet for 2013, complete it, and give us a call at 781.938.0045 to schedule a meeting.



Disability Business Overhead Expense Insurance

By guest author Lawrence B. Keller, CLU, ChFC, CFP?

As the owner of a medical or dental practice, you are the key to its success. Your patients and staff rely on you. If you become disabled, you may be unable to provide the services your patients expect or the leadership that your employees need.

Overhead Expense disability insurance is a cost effective way to ensure that your practice can meet its ongoing expenses during a period of disability. Protecting your practice from financial loss is important whether you eventually return to work or decide to sell your practice. Just as individual disability income insurance can help you pay your living expenses while you recover from a serious injury or illness, Overhead Expense disability insurance can help you to keep your medical practice healthy.

Business Overhead Expense insurance is a cost effective way to ensure that your business can meet its ongoing expenses during a period of disability by reimbursing the owner(s) of a practice up to 100% of the normal ongoing business expenses incurred during a disability, including items such as:

  • Rent
  • Electricity
  • Telephone
  • Heat
  • Water
  • Laundry, janitorial and maintenance services
  • Employee salaries
  • Employee benefits
  • Real estate taxes
  • Property, liability and malpractice insurance
  • Interest on debt
  • Depreciation
  • Rent or lease expense of furniture or equipment
  • Legal and professional services
  • Professional, trade, and association dues
  • Licensing fees
  • Billing and collection fees
  • Other tax-deductible business expenses
  • Salary for your replacement (depending upon insurance carrier)

Typically, monthly benefits up to $50,000 are available with benefit periods up to 30 months. While this may seem to be a substantial amount of coverage, it is not uncommon to find healthcare practices with overhead expenses that far exceed this limit. As a result, special risk insurers, like Lloyd?s of London, are able to supplement the traditional market with monthly benefits in excess of $250,000.

Premium payments for Overhead Expense insurance are tax-deductible as a reasonable and necessary business expense (Rev. Rul 55-264, 1955-1 C.B. 11). As such, benefits received during disability, while taxable upon receipt, are used to pay practice related expenses, which are tax-deductible. The net tax result is a ?wash? so the net tax impact is neutral.


While most doctors and dentists are keenly aware of the need to purchase individual disability insurance coverage, few are aware of the importance of Disability Business Overhead Expense insurance.

Lawrence B. Keller, CLU, ChFC, CFP? is the founder of Physician Financial Services, a New York- based firm specializing in income protection and wealth accumulation strategies for physicians. He can be reached at (516) 677-6211 or by email to with comments or questions.

Part 1: New Tax Rules, Hikes and Strategies for 2013

Tax hikes in 2013 mean it’s time to revisit available tax breaks.

Effective 1/1/13, taxes increased for many well-paid Americans. Here are three separate tax hikes that might affect you:

  • Top federal income tax rate now 39.6%
  • Top Medicare tax on earned income now 3.8%
  • New 3.8% Medicare tax on unearned income

Beginning on January 1, 2013, The American Taxpayer Relief Act raised the top federal marginal income tax rates from the 35% max in place since the Bush 2003 tax cuts to 39.6% for taxable income exceeding the following thresholds:

Threshold for 39.6% Bracket:

Filing Status

Tax Bracket Starts
(at taxable income)

Married Filing Joint


Head of Household




Married Filing Separate


So how much more federal income taxes could you expect to pay this year due to the 39.6% bracket? Single individuals with taxable income of $600k will pay the federal government an additional $9,200. Earn $400k more to bring your taxable income to $1 million, and the additional taxes you’ll owe jumps to $27,600. Let’s look at the increases based on the four filing statuses:

Additional Taxes Starting in 2013

Taxable income


Head of Household

Married Filing Joint

Married Filing Separate
















Increased Tax Rate on Long-Term Capital Gains and Corporate Dividends

The top tax bracket was not the only increase to federal income taxes. For long-term capital gains and qualified corporate dividends, the tax rate increases by one-third – from 15% to 20% – based on the same taxable income thresholds as apply the 39.6% bracket, effective 1/1/13.

Higher Medicare Taxes:

There are two new increases to the Medicare tax. One upped the Medicare tax that you’ll pay on your earned income from 1.45% to 2.25% for single individuals earning more than $200k or married couples whose combined earned income exceeds $250k. Keep in mind that your employer will match Medicare taxes withheld from your pay at a rate of 1.45%, so the federal government now gets 3.8% on your earned income that exceeds the applicable threshold.

Increased Medicare Tax

Filing Status

3.8% Tax Starts
(Earned income)

Married Filing Joint




New 3.8% Medicare Tax On Unearned Income:

The new 3.8% Medicare tax on unearned income kicks in at the $200k of Adjusted Gross Income (AGI) for single individuals and $250k of AGI for married couples. Unearned income includes interest, dividends, capital gains, annuities, royalties, and rents. This is the first time that unearned income has ever been subject to Medicare taxes.

Tax Rates for Capital Gains and Qualified Dividends ? 2012 vs 2013


Married Filing Jointly

Capital Gains and Qualified Dividends -2012 rates

Capital Gains and Qualified Dividends -2013 rates

Increase in Tax Rates on Investments 2012 vs 2013

$0 – $36,250

$0 – $72,500




$36,250 – AGI of $200,000

$72,500 – AGI of $250,000




$200,000 – taxable income of $400,000

$250,000 – taxable income of $450,000