The Internal Revenue Service has published a big new collection of tax parameters for 2019, in Revenue Procedure 2018-57.
This document sets minimums and maximums for everything from cafeteria plan contribution limits to how much the government can claw back from moderate-income workers who get too much government help with paying for individual major medical insurance.
(Related: 9 New 2018 Tax Numbers to Know)
A copy of the full IRS document is available here.
Here’s a look at what happened to 12 parameters (and sets of parameters) of interest to insurance agents and brokers who offer products such as life insurance, health insurance and long-term care insurance.
We pulled the 2018 numbers from IRS Rev. Proc. 2017-58.
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 the 2018 revenue procedure and the 2019 revenue procedure.
If you use these figures in your own professional life, it might be a good idea to start by talking to your own tax and compliance advisors, both to verify the numbers and to make sure you know what you can and can’t tell your clients and prospects.
Numbers for Life Insurance and Estate Planning
1. Unified Credit Against Estate Tax
To $11.4 million for a decedent dying in 2019, from $5.6 million for a decedent dying in 2018.
2. 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 $1.55 million, from $1.52 million.
3. Valuation of Qualified Real Property in the Decedent’s Gross Estate
For 2019, for an executor who chooses to use the special-use valuation method described in Section 2032A of the Internal Revenue Code, the limit on the total decrease in the resulting property value is $1.16 million. That’s up from $1.14 million for 2018.
4. Gift Tax Exclusion
The exclusion for 2019 will be $15,000 for gifts to any person, and $155,000 for gifts to a spouse who is not a citizen of the United States. That compares with 2018 limits of $15,000 for gifts to any person, and $152,000 for gifts to a non-U.S. citizen spouse.
Numbers for Health Insurance and Benefits
5. Cafeteria plans
The dollar limit for voluntary employee salary reductions for contributions to health flexible spending arrangements (FSAs) will increase to $2,700, from $2,650.
6. Medical Savings Accounts
The MSA is the ancestor of the HSA, and of the health reimbursement arrangement.
An MSA holder is supposed to combine high-deductible health coverage with a special savings account.
For 2019, the acceptable deductible ranges will be $2,350 to $3,500 for self-only coverage, and $4,650 to $7,000 for family coverage, For 2018, the acceptable deductible ranges are $2,300 to $3,450 for self-only coverage, and $4,600 to $6,850 for family coverage.
The maximum annual out-of-pocket expense limits will increase to $4,650 for individuals and $8,550 for families, from $4,600 for individuals and $8,400 for families.
7. Qualified Small Employer Health Reimbursement Arrangement
The maximum eligible employer reimbursement amounts for this program will increase to $5,150 for individual coverage and from $10,450 for family coverage, from $5,050 for individual coverage and $10,250 for family coverage.
8. Requirement to Maintain Minimum Essential Coverage
For the past few years, the IRS has imposed an Affordable Care Act penalty on many individuals who failed to have what the government has classified as “minimum essential coverage” (MEC), or solid major medical coverage. For 2018, the base “applicable dollar amount” for calculating the penalty is $695. But Section 11081 of the Tax Cuts and Jobs Act of 2017 set the penalty at $0 for taxable years beginning after Dec. 31, 2018. “Accordingly,” the IRS says in the new revenue procedure, “this amount is not included in this revenue procedure.”
9. Affordable Care Act Premium Tax Credit Subsidy Clawbacks
The ACA premium tax credit subsidy helps low-income and moderate-income people pay for private individual and family major medical coverage purchased through the ACA public exchange system.
Most people who use the subsidy take it in the form of an “advance premium tax credit” (APTC) subsidy, based on how much money they might earn during a year. After the year ends, when the APTC users file their taxes and find out how much they actually earned, those APTC users are supposed to get extra money back from the government, if they earned less than expected.
The government is supposed to claw back cash from APTC users who earned more than expected and received too much APTC subsidy help.
The ACA tries to limit APTC clawback pain, by setting limits on how much the government can claw back from low-income and moderate-income APTC users, based on the assumption that few low-income and moderate-income have thousands of spare dollars they can use to pay big, unexpected tax bills. The limits depend on how much the APTC users earn when compared with the federal poverty level (FPL).
Here’s what will happen to the clawback limits.
- Household income under 200% FPL: will hold steady at $300.
- Household income 200% to 299% FPL: to $800, from $775.
- Household income 300% to 399% FPL: to $1,325, from $1,300.
- Household income under 200% FPL: will hold steady at $600.
- Household income 200% to 299% FPL: to $1,600, from $1,550.
- Household income 300% to 399% FPL: to $2,650, from $2,600.
Numbers for Long-Term Care Planners
10. 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 2019 “includible” premium levels compare with the 2018 levels:
- 40 or under: will hold steady at $420.
- More than 40 and up to 50: will increase to $790, from $780.
- More than 50 and up to 60: will increase to $1,580, from $1,560.
- More than 60 and up to 70: will increase to $4,220, from $4,160.
- 70 and older: will increase to $5,270, from $5,200.
11. The Qualified Long-Term Care Insurance Contract or Life Insurance Contract Per Diem Limitation
The dollar limit on the benefits will increase to $370 per day, from $360 per day.
Legislative Advocacy Efforts
12. Reporting Exception Limit
The IRS offers a reporting exception for some tax-exempt organizations with nondeductible lobbying expenditures.
The reporting exception limit will increase to $117 or less for 2019, from $115 or less for 2018.
— Read Industry Groups React to… THAT, on ThinkAdvisor.