While President Trump is under significant observation and scrutiny, many Americans are wondering specifically how our new President will alter the healthcare system since a major part of his campaign was his promise to “repeal and replace” Obamacare promptly once in office. Though it certainly appears that the President’s plans have not moved as quickly as he had hoped, just last week, the House took the first true steps toward “repeal and replace” by passing an initial bill that reconfigures the healthcare system; however, it still has to pass the Senate, and will likely go through many changes and amendments before being accepted into law. The Trumpcare bill passed in the House is without a doubt a far cry from Obamacare, but let’s take a look at some of the major tax differences between his plan and our current system.

1. Lowers the rate for medical itemized deductions. Currently, Obamacare only allows deductions for medical expenses that exceed 10% of your adjusted gross income, whereas Trumpcare would lower that number to the former rate, 7.5% of your adjusted gross income.
2. Health savings account withdrawal penalties would change from 20% under Obamacare to its prior amount: 10%. This penalty is enforced if you withdraw from an HSA before 65 for nonmedical expenses.  
3. Elimination of the $2,500 cap on pre-tax funds permitted to be placed in a healthcare flexible spending account. Individual employers would choose whether to establish a cap or not.
4. Over-the-counter meds could again be purchased with funds from FSA’s or HSA’s.
5. Immediate repeal of the 3.8% net investment income tax, which taxes income from royalties, interest, rents, dividends, passive activities and gains for those with a gross income over $200,000.
6. Immediate repeal of the individual mandate excise tax, or the tax owed if you did not have health insurance.
7. Trumpcare would ultimately repeal the 0.9% additional Medicare surtax on those with gross incomes over $200,000, but not until 2023, a much later date than proposed in the first healthcare bill from the House.  

This is how the bill was framed as passed by the House, however, these and many other aspects of the bill could in all likelihood change as it moves its way through the Senate. While modifications to our healthcare system are clearly on the horizon, Americans may have months of waiting before a final product is revealed to the public.

If you have any questions or would like to discuss how the health care law changes may affect you, please contact me at [email protected].

Also, see related article “Obamacare vs. the GOP plan: What’s Different and What Does It Mean“.