In Revenue Procedure 2018-18, the Internal Revenue Service (IRS) announced revised cost-of-living adjustments for certain limits affecting health and welfare arrangements. The updated limits reflect changes required under the December 2017 tax reform legislation, the Tax Cuts and Jobs Act (TCJA).
Under Revenue Procedure 2018-18, the maximum credit allowed for adoption of a child is $13,810 (reduced from $13,840). In addition, the adoption credit:
Begins to be phased out for individuals with modified adjusted gross incomes (AGI) of more than $207,140 (decreased from $207,580 under the IRS's October 2017 guidance).
Is completely phased out for individuals with modified AGI of $247,140 or more (decreased from $247,580 or more).
The maximum amount that can be excluded from an employee's gross income for adoption of a child under an employer's adoption assistance program is $13,810 (decreased from $13,840). As with the adoption credit, the exclusion:
Begins to be phased out for individuals with modified AGI of more than $207,140 (decreased from $207,580).
Is completely phased out for individuals with modified AGI of $247,140 or more (decreased from $247,580).
Other Limits Affecting Health and Welfare Arrangements
Revenue Procedure 2018-18 also affects the deductibles and out-of-pocket limits for high-deductible health plans (HDHPs) associated with Archer medical savings accounts (Archer MSAs), as follows:
The minimum annual deductible for an HDHP (family coverage) is $4,550 (decreased from $4,600).
Under the Affordable Care Act's (ACA's) small business health care tax credit, the maximum credit is phased out based in part on an employer's average annual wages in excess of $26,600 (decreased from $26,700) for 2018. The $26,600 amount also is used in calculating who is an eligible small employer for the credit (see Practice Notes, Small Business Health Care Tax Credit Under the ACA and Affordable Care Act (ACA) Overview).
In addition, Revenue Procedure 2018-18 reduces the calendar year limits for penalties regarding:
Filing a correct information return, for returns required to be filed in 2019 (26 U.S.C. § 6721).
Furnishing a correct statement to individuals, for statements required to be furnished in 2019 (26 U.S.C. § 6722).