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IRS Revises Annual Limits Due To Tax Reform Legislation

Mar 28, 2018 6:30:00 AM

HSA Limits - FB.jpgOn March 5, 2018, the IRS made several adjustments based on inflation amounts due to the Tax Cuts and Jobs Act (2017 tax reform) and Rev. Proc. 2018-18:

  • The maximum HSA contribution for family coverage in 2018 has changed from $6,900 to $6,850. Employers offering HSAs will need to revise their documentation, communicate the new limit to employees, and help employees modify their contributions accordingly.
  • Under an employer-sponsored adoption assistance program, an employee may exclude up to $13,810 from gross income in 2018 for the adoption of a child. This is a decrease from the previously announced amount of $13,840. Employers with such a program will need to revise program documentation and communicate the new limit to employees.
  • The small business health care tax credit is available to employers who have fewer than 25 full-time employees, including equivalents (FTEs), pay at least half of employee health insurance premiums, and have an average annual wage below the maximum limit. The maximum limit for 2018 was previously $53,400 but is now $53,200. The revised limit shouldn't impact employer eligibility for the tax credit. This is because of the calculation used to determine an employer's average annual wage. After dividing the aggregate amount of wages paid by the employer by the number of FTEs, the employer is permitted to round down to the next lowest $1,000. Thus, regardless of whether the employer's average annual wage is $53,400 or $53,200, employers are permitted to round down to $53,000 and qualify.
Should you have questions about these changes and how they impact your organization, please reach out to a member of your Gibson team.

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