The Patient Protection and Affordable Care Act, which I ll call Obama-care, is now law. It has lots of tax changes, and folks like me will be trying to make sense out of them for a long time. It won t be easy. This law is as poorly written as you might expect given the unseemly process that brought it to life.

Anyway, here s my take on some of the key tax changes buried in Obama-care that will affect individual taxpayers between now and the not-too-distant future. I can t come close to covering all the changes in one article, so please stay tuned for more on this subject later on.

Starting This Year

Tax Breaks for Covering Adult Children

Effective for plan years beginning after Sept. 23, 2010, health plans that cover dependent children must continue to cover adult kids until they turn age 26. This little-noticed new requirement is a sure way to increase health insurance costs, which is exactly what Obama-care was supposed to prevent.

In conjunction with the new requirement, employer-provided health coverage for an employee s adult child is now treated as a tax-free fringe benefit as long as the child has not reached age 27 by the end of the year.

If you re self-employed and pay for your own coverage, the cost of covering an adult child after Sept. 30, 2010 is eligible for the self-employed health insurance premium write-off as long as the child has not reached age 27 by the end of the year. It doesn t matter if the adult child is your dependent or not.

Starting in 2011

No More Tax-Free FSA, HRA or HSA Reimbursements for Non-Prescription Drugs

If you have an employer-sponsored health care flexible spending account (FSA) or health reimbursement arrangement (HRA) at work or your own health savings account (HSA), you can take tax-free withdrawals to cover non-prescription drugs like pain and allergy relief medications. Starting next year, however, this privilege will only be available for prescriptions drugs, insulin and doctor-prescribed non-prescription medications.

Higher Penalty on Nonqualified HSA Payouts

Under current rules, if you take money out of your tax-favored HSA for reasons other than to cover qualified medical expenses, you owe federal income tax plus a 10% penalty on any account earnings included in the payout. Starting next year, the penalty increases to 20%. Since HSAs are supposed to be used for medical expenses, this change actually makes sense to me.

Starting in 2013

New $2,500 Limit on Pre-Tax Contributions to Health Care FSAs

Right now, there s no tax-law limit on the amount of salary you can contribute to your employer s health care FSA plan. That s cool because FSA contributions reduce your taxable salary. Then you can pull out the money tax-free to cover out-of-pocket medical expenses. Starting in 2013, however, your maximum annual FSA contribution will be limited to $2,500.

New Restriction on Itemized Medical Expense Deductions

Right now, you can claim an itemized deduction for medical expenses (incurred for you, your spouse and your dependents) to the extent they exceed 7.5% of your adjusted gross income or AGI. Starting in 2013, the hurdle is raised to 10% of AGI unless you re 65 or older. For seniors, the 10%-of-AGI rule won t kick in until 2017.

Additional 0.9% Medicare Tax on Salaries and Self-Employment Income Earned by the Rich

Right now, the Medicare tax on salaries and self-employment income is 2.9%. If you re an employee, 1.45% is withheld from your paychecks, and the other 1.45% is paid by your employer. If you re self-employed like me, you get to pay the whole 2.9% yourself. Starting in 2013, you ll be hit with an extra 0.9% Medicare tax on salary or self-employment income above $200,000 or above $250,000 of combined salary or self-employment income for a married joint-filing couple.

New 3.8% Medicare Tax on Net Investment Income Collected by the Rich

Starting next year, the maximum federal income rate on long-term capital gains and dividends is scheduled to rise from 15% to 20% as the so-called Bush tax cuts expire. President Obama repeatedly promised 20% would be the end of it, but guess what - he changed his mind. Starting in 2013, all or part of the net investment income collected by higher-income folks can get socked with a 3.8% Medicare contribution tax. So the maximum tax rate for 2013 and beyond will actually be 23.8%.