IRS modifies some benefits-related 2018 inflation adjustment amounts

The IRS has modified certain previously released inflation-adjusted amounts. Generally, these new inflation-adjusted figures apply to tax years beginning in 2018 or transactions or events occurring in calendar year 2018. The benefits-related modified items include the adoption credit, employee health insurance expense of small employers, medical savings accounts (MSA), and health savings accounts (HSA).

Adoption credit.

The adoption credit is $13,810. The credit begins to phase out for taxpayers with modified adjusted gross income in excess of $207,140 and is completely phased out for taxpayers with modified adjusted gross income of $247,140 or more. The amounts of adoption assistance that can be excluded from an employee’s gross income is also $13,810, with the same phaseout as the adoption credit.

Employee health insurance expense of small employers.

For calendar year 2018, the dollar amount in effect under Code Sec. 45R(d)(3)(B) is $26,600.

Medical savings accounts.

For tax years beginning in 2018, the term “high deductible health plan” as defined in Code Sec. 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,300 and not more than $3,450, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,550. For family coverage, the term means a health plan that has an annual deductible that is not less than $4,550 and not more than $6,850, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,400.

Health savings accounts.

For calendar year 2018, the annual limitation on deductions under Code Sec. 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,450. For calendar year 2018, the annual limitation on deductions under Code Sec. 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $6,850.
For calendar year 2018, a “high deductible health plan” is defined under Code Sec. 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage.

SOURCE: Rev. Proc. 2018-18, I.R.B. 2018-10, March 5, 2018.
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