NU Online News Service, Dec. 3, 2003, 11:53 a.m. EST – The Internal Revenue Service has announced the new, inflation-adjusted amounts for certain items needed for computing 2004 federal income taxes.[@@]

The changes, described in Revenue Procedure 2003-85, affect the tax breaks for long term care insurance premiums and Medical Savings Accounts as well as the annual gift tax exclusion.

- LTC insurance premiums: The federal government lets taxpayers deduct a portion of individual LTC premiums from taxable income, but only if taxpayers spend enough on health care to itemize their medical expenses.

Here are the increases in the amount of eligible LTC premiums that taxpayers can include in itemized medical care expenses:

Attained age

2004 Limit

2003 Limit

40 or less

$260

$250

41-50

$490

$470

51-60

$980

$940

61-70

$2,600

$2,510

Over 70

$3,250

$3,130

- LTC insurance payments: The daily limit on periodic payments received under a qualified LTC insurance contract has increased to $230, from $220.

- MSAs: For taxpayers who have MSAs, the range of deductibles for health plans that fit the government’s definition of “high deductible health plan” will be $1,700 to $2,600 for self-only coverage and $3,450 to $5,150 for family coverage.

The 2003 deductible ranges were $1,700 to $2,500 for individuals and $3,350 to $5,050 for families.

The maximum annual out-of-pocket expense levels for MSA policies will increase to $3,450, from $3,350, for self-only coverage and to $6,300, from $6,150, for family coverage.

- The annual gift exclusion will continue to be $11,000 for most gifts to most people, but the exclusion will increase to $114,000, from $112,000, for most gifts to a spouse who is not a citizen of the United States.

The new revenue procedure, which was written by Marnette Myers of the IRS Office of Associate Chief Counsel, is on the Web at http://www.irs.gov/pub/irs-drop/rp-03-85.pdf

The item amounts in effect for 2003 are on the Web at http://www.irs.gov/pub/irs-drop/rp-02-70.pdf