We haven’t said what we’re thankful for yet at Thanksgiving, but the Internal Revenue Service (IRS) is already planning ahead for the New Year with the release of the 2018 Cost-of-Living Adjustments (COLAs). Read on to find out what you as an employer need to know about these changes and how they will impact a variety of tax-related limits.
In terms of what will increase for fiscal 2018, the changes include:
FSAs: Starting in 2018, the annual employee salary contribution limit for FSAs will increase $50 over 2017 numbers to $2,650.
Qualified transportation limits: The maximum monthly limit that an employee can have excluded from their income for qualified transportation benefits – including parking benefits, transit passes and vanpooling expenses – will increase a whopping $5 over last year’s limits to $260.
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs): The maximum payment/reimbursement under QSEHRA cannot exceed $5,050 for an individual and $10,250 for a family, marking an increase of $100 and $200, respectively.
Small business health care tax credit: The average annual wage at which the tax credit begins to phase out for eligible small employers will increase $500 over 2017 figures to $26,700, while the maximum average annual wages to qualify for the credit as an “eligible small employer” will increase $1,000 to $53,400.
Archer MSAs: For employees with Archer MSAs (for medical expenses) tied to their high deductible health coverage, the annual deductible for self-only coverage must now be between $2,300 (up $50 from 2017) and $3,450 (up $100), with an out-of-pocket maximum of $4,600 (up $100). For family coverage, the annual deductible must be between $4,600 (up $100 from 2017) and $6,850 (up $100), with an out-of-pocket maximum of $8,400 (up $150).
Adoption assistance exclusion/adoption credit: The maximum amount that may be excluded from an employee’s gross income under an employer-provided adoption assistance program will increase $270 over 2017 figures to $13,840 (which also applies to individuals). However, it should be noted that the exclusion and credit will begin to be phased out for individuals with modified adjusted gross incomes greater than $207,580 and will be entirely phased out for individuals with modified adjusted gross incomes of $247,580 or more.
Premium Tax Credit: For taxable years beginning in 2018, the following limitations on the tax for excess advanced credit payments will include:
- For unmarried individuals (other than surviving spouses and heads of household): $300 for household income less than 200% of the federal poverty line (FPL); $775 (up $25 from 2017) for household income less than 300% of FPL; and $1,300 (up $25) for household income less than 400% of FPL.
- For all other taxpayers, $600 for household income less than 200% of FPL, $1,550 (up $50 from 2017) for household income less than 300% of FPL; and $2,600 (up $50) for household income less than 400% of FPL.
To view the full list of changes per the IRS procedure document, click here.
Abel HR’s payroll team can help you and your employees prepare for 2018 and expertly guide you through all the changes and save you the worry. For your peace of mind, all of Abel HR’s work is audited monthly by an outside firm to ensure accuracy and you always receive proof of tax payment. Prepare for the New Year by calling us at 800-400-1968.