IRS Inflation Adjustments for 2019

The Internal Revenue Service (IRS) has announced annual inflation adjustments for more than 60 tax provisions for the 2019 tax year, including the tax rate schedules and other tax changes.

This is the first year that the Internal Revenue Code has used the Chained Consumer Price Index (CPI) adjustment, which could explain the slight delay in receiving this update from the IRS. The following provides a summary of the changes taking place. For more information, click here.

Adjusted Amounts for 2019:

The dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements will be $2,700, up from $2,650.
The monthly limit on fringe benefit exclusion for transit and parking will be $265, up from $260.
The maximum exclusion for qualified adoption expenses furnished pursuant to an adoption assistance program will be $14,080, up from $13,840. The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified adjusted gross income in excess of $211,160, up from $207,580, and is completely phased out for taxpayers with modified adjusted gross income of $251,160 or more, up from $247,580.
The maximum reimbursement from a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) will be $5,150 for single coverage, up from $5,050, and $10,450 for family coverage, up from $10,250.
The individual mandate penalty for failure to maintain minimum essential coverage is set to zero as of Jan. 1, 2019.
The thresholds for determining who is a highly compensated employee or whether an officer is a key employee for purposes of cafeteria plan nondiscrimination testing will increased to $125,000 and $180,000, respectively.
The penalties for failing to file correct payee statements, such as W-2s and 1095-Cs remain unchanged at $270. Since the forms must be provided to both the employee and the IRS, the effective penalty is $540 per employee.
Employer shared responsibility penalties have increased for 2019. The failure to offer coverage (4980H(a)) is $208.33 a month. The failure to offer affordable minimum value coverage (4980H(b))is $312.50 a month.

Although new Medical Savings Accounts have not been allowed for many years, existing ones are allowed to continue and new limits were also announced for these.

Earlier this year, the IRS announced increased annual contribution amounts for Health Savings Accounts. The contribution limit for single coverage will be $3,500, up from $3,450 and the contribution limit for family coverage will be $7,000, up from $6,900.

The limits on annual deductibles are also subject to annual inflation adjustments. For 2019, the lower limit on the annual deductible for an HDHP is $1,350 for self-only coverage and $2,700 for family coverage, both unchanged from 2018.

The upper limit for out-of-pocket expenses in a HDHP is $6,750 for self-only coverage and $13,500 for family coverage. This is an increase from 2018, $100 and $200 respectively.

The upper limit for out-of-pocket expenses in a non-HDHP plan is $7,900 for self-only coverage and $15,800 for family coverage. This is an increase from 2018, $550 and $1,100 respectively.

Earlier this year, the IRS also announced an increase in the affordability percentage, with the percentage increase from 9.56 percent to 9.86 percent.