Additional 2013 Federal Tax Changes

In order to reduce taxpayer burden, the IRS has added the following new options to Schedule C and Schedule D:

Home Office Deduction — New Simplified Method
This new simplified method has been added to Schedule C and may be used by taxpayers that use 300 square feet or less of their home for business purposes.

Here are highlights of the simplified method:

• Uses flat deduction amount of $5 per square foot to calculate the expenses for business use of your home on Schedule C, line 30.
• If simplified option is used, then Form 8829 (Expenses for Business Use of Your Home) does not need to be completed.
• Allowable mortgage interest and property taxes may be claimed in full on Schedule A if the simplified method is used.
• A depreciation deduction may not be claimed for years that the simplified option is used.
• If the home office expense that is calculated using the simplified method is limited because it exceeds the business gross income, the excess may not be carried forward to a future year. Under the regular method any excess can be carried forward.
• You may choose to use either the simplified method or the regular method (complete Form 8829) for any taxable year. This means you can switch back and forth each year.

For more details see the Simplified Option for Home Office Deduction.

Aggregate Transaction Reporting on Schedule D
(Capital Gains and Losses)
For stock sales, if the basis that is reported on the Form 1099-B (Proceeds From Broker and Barter Exchange Transactions) is correct, then the totals of all of these transactions may be reported directly on Schedule D on new lines 1a or 8a instead of completing Form 8949 (Sales and Other Dispositions of Capital Assets).

Individual Requirement to Have Insurance and State Insurance Exchanges

As we near the open enrollment period for the individual insurance requirement, now is the time to become more familiar with what people without health insurance will need to do when October 1, 2013 arrives. Below are the highlights of what the Affordable Care Act requirements are for obtaining health insurance, how the enrollment process on a State Exchange will operate, and how the premium assistance subsidy will work.

Individual Requirement to Obtain Health Insurance

Everyone will be required to have health insurance that meets a minimum level of benefits beginning on January 1, 2014.

If a person does not obtain health insurance for 2014, they will be required to pay an additional tax when they file their 2014 Federal income tax return. The additional tax for 2014 will be calculated as the greater of:

• 1% of their income that exceeds their filing threshold based on their filing status; or
• $95 for the taxpayer and if applicable, the spouse and dependents not to exceed $285 for 2014. The additional tax for dependents under age 18 is $47.50 for 2014.

For a complete explanation of how the additional tax will be calculated, see the Individual Penalty for Not Having Health Insurance page on the CrossLink website.

State Exchanges and Premium Assistance Subsidy

People who do not have health insurance will be able to obtain it at the State Exchange located in their State of residence. The State Exchange will also determine the potential amount of premium assistance subsidy that individuals qualify for.

The subsidy is designed to help people pay for their 2014 health insurance premiums. It is essentially a pre-payment of the premium tax credit that will be calculated when they file their 2014 Federal income tax return.

Here is how the State Exchange will work:

• Most people will sign up with the exchange via the internet by creating an account and filling out an online application on their State Exchange's website.
• The Exchange will use the information from the application and their income from their 2012 Federal return to first determine if they are eligible for coverage under a government health insurance program such as Medicaid.
• If not eligible for a government program, the exchange will determine what their subsidy is.
• Finally, the person applying may select an insurance plan that is offered by their State Exchange.

For more information on State Exchanges, see the following pages on the Federal government's Healthcare.gov website:

• Welcome to the Marketplace
• Health Insurance Marketplace

Health Insurance Premium Subsidy
The Health Insurance Premium Subsidy is also known as the Advance Premium Tax Credit.

A person is eligible for a subsidy (advance premium tax credit) to help pay for their 2014 health insurance premiums if they obtain their insurance at a State Exchange and their income is between 100% and 400% of the Federal Poverty Line.

It is important to remind people that the subsidy does not pay for the entire premium and the subsidy is paid directly to the insurance company. Individuals must pay a minimum amount of the premium based on where they fall on the Federal Poverty Line.

The minimum amount a person must pay is calculated as a percentage of their income and it ranges from 2%, if they fall between 100% and 133% of the Federal Poverty Line, up to 9.5%, if they fall between 300% and 400% of the Federal Poverty Line.

For a more detailed explanation of how the subsidy is determined, see the Premium Assistance Subsidy page on the CrossLink website.