The Internal Revenue Service has published a big new collection of tax parameters for 2018, in Revenue Procedure 2017-58.
Even financial professionals who do their best to keep as much room between themselves and tax questions as possible may find themselves hunting for the revenue procedure document over and over, just to try to find just what, for example, the maximum possible exclusion for long-term care insurance premiums will be for a 55-year-old will be in 2018.
Here’s a look at what happened to nine parameters of interest to advisors, insurance agents and brokers who offer products such as life insurance, annuities, group health plans and long-term care insurance.
The new numbers come from this new parameters document (which is a copyright-free document published by IRS).
The earlier numbers come from the previous IRS parameters document.
The IRS lists William Ruane, an official in the Office of the Associate Chief Counsel for Income Tax and Accounting, as the principal author for both documents.
Of course, when in doubt, if you are not a tax professional yourself, triple check the numbers given here, and use the underlying documents mainly to support communications with your own compliance advisors.
Numbers for everyone
1. The Standard Deduction
Married individuals filing joint returns, and surviving spouses: Increased to $13,000, from $12,700.
Heads of households: Increased to $9,550, from $9,350.
Unmarried individuals (other than surviving spouses and heads of households): Increased to $6,500, from $6,350.
Married individuals filing separate returns: Increased to $6,500, from $6,350.
Numbers for life insurance and estate planning
2. Unified Credit Against Estate Tax
To $5.6 million for a decedent dying in 2018, from $5.49 million for a decedent dying in 2017.
3. Interest on a Certain Portion of the Estate Tax Payable in Installments
The dollar amount used to determine the “2% portion,” for calculating interest, will increase to $1.52 million, from $1.49 million.
4. Gift Tax Exclusion
The exclusion for 2018 will be $15,000 for gifts to any person, and $152,000 for gifts to a spouse who is not a citzen of the United States. That’s up from $14,000 for gifts to any person in 2017, and up from $149,000 for gifts to a spouse who is not a citizen of the United States.
Numbers for health insurance and benefits
5. Cafeteria plans
The dollar limit for voluntary employee salary reductions for contributions to health flexible spending arrangements will increase to $2,650, from $2,600.
6. Qualified Small Employer Health Reimbursement Arrangement
The maximum eligible employer reimbursement amounts for this new program will increase to $5,050 for individual coverage and from $10,250 for family coverage, from the original amounts, for $4,950 for indivdual coverage and $10,000 for family coverage, given in the statute.
7. Requirement to Maintain Minimum Essential Coverage
If the Internal Revenue Service continues to impose Affordable Care Act penalties on individuals who fail to maintain what the government classifies as solid major medical coverage, or minimum essential coverage (MEC), in 2018, the IRS will continue to use $695 as the base “applicable dollar amount” when calculating the penalties. The IRS is not changing the MEC penalty applicable dollar amount.
Numbers for long-term care planners
8. Eligible Long-Term Care Premiums
Clients who have high enough medical bills to benefit from itemizing their medical expenses can include at least some of their private long-term care insurance premiums in their medical expense total.
The amounts that can be included in the medial expense total vary by age.
Here’s how the “includible” premium levels have changed:
40 or under: to $420, from $410.
From more than 40 up to 50: to $780, from $770.
From more than 50 up to 60: to $1,560, from $1,530.
From more than 60 up to 70: to $4,160, from $4,090.
70 and older: to $5,200, from $5,110.
9. The Qualified Long-Term Care Insurance Contract or Life Insurance Contract Per Diem Limitation
The dollar limit on the benefits will hold steady at $360 per day.
—-Read States Dumping Estate Taxes, but Beware Those That Haven’t on ThinkAdvisor.