Special Alert: 2015 Changes to FSA Limits and Other Tax-Related Items

Various Tax Benefits Will Change in 2015 Due to Inflation Adjustments

health-insurance-costsThe IRS has announced a number of inflation-adjusted tax items for 2015. Items that may be of particular interest to employers and employees include the following:

  • Limit on Health Flexible Spending Arrangement (FSA) Contributions. The annual dollar limit on employee contributions to employer-sponsored health FSAs increases to $2,550 (up $50 from the amount for 2014).
  • Small Business Health Care Tax Credit. The maximum amount of the small business health care tax credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 (unchanged from last year) and the employer’s average annual wages in excess of $25,800 (up from $25,400 for 2014).
  • Qualified Transportation Fringe Benefits. The monthly limit on the value of the fringe benefit exclusion for transportation in a commuter highway vehicle and any transit pass remains unchanged at $130. The monthly limit for qualified parking remains unchanged at $250.
  • Medical Savings Accounts (MSAs). The 2015 limits for annual deductibles and the maximum out-of-pocket expenses for high deductible health plans (HDHPs) are as follows:
    • Self-only coverage. The minimum annual deductible remains unchanged at $2,200, while the maximum annual deductible increases to $3,300. The annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits cannot exceed $4,450.
    • Family coverage. The minimum annual deductible increases to $4,450, and the maximum annual deductible increases to $6,650. The annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits cannot exceed $8,150.
  • Earned Income Credit. The maximum Earned Income Credit amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014. IRS Revenue Procedure 2014-61 includes a table that provides maximum credit amounts for other categories, income thresholds, and phase-outs.

Details on these inflation adjustments and others are contained in Revenue Procedure 2014-61. You can visit the Fringe Benefits section of your online HR library to learn more about the tax consequences of various employer-provided benefits.

Please Note: The information and materials herein are provided for general information purposes only and are not intended to constitute legal or other advice or opinions on any specific matters and are not intended to replace the advice of a qualified attorney, plan provider or other professional advisor. This information has been taken from sources which we believe to be reliable, but there is no guarantee as to its accuracy. In accordance with IRS Circular 230, this communication is not intended or written to be used, and cannot be used as or considered a ‘covered opinion’ or other written tax advice and should not be relied upon for any purpose other than its intended purpose.

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