Compliance Alert – Increased Tax Savings for 2018

 

The Internal Revenue Service (IRS) has announced a number of inflation-adjusted tax items for 2018, some of which remain unchanged.

 

*Flexbile Spending Accounts (FSAs)  The annual dollar limit on employee contributions to employer-sponsored health flexible spending arrangements (FSAs) increases to $2,650 (up from $2,600).  

 

*Health Savings Accounts (HSAs).  The 2018 limits for annual deductibles and maximum out-of-pocket expenses for high deductible health plans (HDHPs) are as follows:

Self-only coverage. The plan must have an annual deductible that is at least $2,300 (up from $2,250 for 2017); but not more than $3,450 (up from $3,350 for 2017). The annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits cannot exceed $4,600 (up from $4,500 for 2017).

Family coverage. For tax year 2018, the floor for the annual deductible increases to $4,600 (up from $4,500 for 2017), however the deductible cannot be more than $6,850 (up from $6,750 for 2017). The annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits cannot exceed $8,400(up from $8,250 for 2017).

 

*401k.  The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,000 to $18,500.

 

*Qualified Transportation Fringe Benefits. For tax year 2018, the monthly limitation for the qualified transportation fringe benefit rises to $260 (up from $255 for 2017) for transportation and qualified parking.

 

*Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). For tax year 2018, to qualify as a QSEHRA, the total amount of payments and reimbursements cannot exceed $5,050 per employee (up from $4,950 for 2017) or $10,250 per family (up from $10,000 for 2017).

 

Earned Income Credit. The maximum Earned Income Credit amount is $6,444 for taxpayers filing jointly who have 3 or more qualifying children (up from a total of $6,318 for 2017). IRS Revenue Procedure 2017-58 includes a table that provides maximum credit amounts for other categories, income thresholds, and phase-outs.