06 Nov IRS Releases Tax Benefit Inflation Adjustments for 2014

Originally posted https://www.ifebp.org

Internal Revenue Service (IRS) Revenue Procedure 2013-35 provides the cost-of-living adjustments to certain items for 2014 as required under the Internal Revenue Code. This revenue procedure includes updates for numerous items including:

Adoption Assistance Programs
For taxable years beginning in 2014, under § 137(a)(2) the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $13,190. Under § 137(b)(1) the maximum amount that can be excluded for amounts paid or expenses incurred by an employer for qualified adoption expenses furnished through an adoption assistance program for other adoptions by the employee is $13,190. The amount excludable from gross income begins to phase out for taxpayers with modified adjusted gross income in excess of $197,880 and completely phases out with modified adjusted gross income of $237,880 or more.

Health Flexible Spending Arrangements (Health FSA)
The Affordable Care Act amended § 125 to provide limitations on Health FSAs. The dollar limitation on voluntary employee salary reductions for a health FSA is adjusted for inflation for taxable years beginning after December 31, 2013. For taxable years beginning in 2014, the dollar limitation is $2,500.

Medical Savings Accounts

• Self-only coverage. For taxable years beginning in 2014, the term “high deductible health plan” as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan with an annual deductible not less than $2,200 and not more than $3,250, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,350.
• Family coverage. For taxable years beginning in 2014, the term “high deductible health plan” means, for family coverage, a health plan with  an annual deductible not less than $4,350 and not more than $6,550, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,000.

Qualified Transportation Fringe Benefit
 For taxable years beginning in 2014, the monthly limitation under § 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $130. The monthly limitation under § 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $250.