Obamacare Imposes New Tax on Over-the-Counter Medication

April 15, 2011

Today is the last tax day individuals with health savings accounts, flex spending accounts or health reimbursement accounts will enjoy tax-free over-the-counter medication benefits.

Starting on January 1, 2011, Obamacare subjected FSAs, HSAs, and HRAs to new tax restrictions. Individuals can no longer use their spending or reimbursement accounts to pay for over-the-counter medication without a prescription. If a person does use their spending account on what Obamacare deems "nonqualified" medical expenses, the cost of the drug will be counted as income and taxed at 20%.

In order to avoid any possible tax penalties, the law forces individuals to visit their doctor to obtain a prescription for common, over-the-counter drugs, such as Claritin, incurring the cost of an office visit and adding to the overall increase in health care spending.

Republicans are fighting to repeal the health care law in its entirety. Until then, Congressional Republicans are scoring victories to defund the law. The short term spending bill to fund the federal government through fiscal year 2011 freezes the IRS' budget, preventing it from hiring 16,500 new agents required to enforce the law's tax increases and mandates.

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