IRS Releases 2016 Inflation Adjustments for Various Tax Benefits
October 2015
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The Internal Revenue Service (IRS) has announced a number of inflation-adjusted tax items for 2016, some of which remain unchanged. Among other items, the annual dollar limit on employee contributions to employer-sponsored health flexible spending arrangements (FSAs) remains unchanged (at $2,550).
Other Items of Interest
Other inflation-adjusted items for tax year 2016 that may be of interest to employers and employees include the following:
- Qualified Transportation Fringe Benefits. For tax year 2016, the monthly limitation for the qualified transportation fringe benefit remains at $130 for transportation, but rises to $255 for qualified parking (up from $250 for tax year 2015).
- Archer MSAs. The 2016 limits for annual deductibles and maximum out-of-pocket expenses for high deductible health plans (HDHPs) are as follows:
- Self-only coverage. The plan must have an annual deductible that is at least $2,250 (up from $2,200 for 2015); but not more than $3,350 (up from $3,300 for tax year 2015). The annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits cannot exceed $4,450 (unchanged from 2015).
- Family coverage. For tax year 2016, the floor for the annual deductible remains at $4,450, however the deductible cannot be more than $6,700 (up $50 from 2015). The annual out of-pocket expenses required to be paid (other than for premiums) for covered benefits cannot exceed $8,150 (unchanged from 2015).
- Earned Income Credit. The maximum Earned Income Credit amount is $6,269 for taxpayers filing jointly who have 3 or more qualifying children (up from a total of $6,242 for tax year 2015). IRS Revenue Procedure 2015-53 includes a table that provides maximum credit amounts for other categories, income thresholds, and phase-outs.
For More Information
Details on these inflation adjustments and others are contained in Revenue Procedure 2015-53.
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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