The Internal Revenue Service has published Revenue Procedure 2019-44, a new set of official numbers that will affect people’s 2020 taxes.
The IRS publishes a similar parameters document every year. The parameters documents give the new, inflation-adjusted figures for many important minimums and maximums, such as limits on cafeteria plan contributions.
William Ruane, an official in the Office of the Associate Chief Counsel for Income Tax and Accounting, has returned as the principal author.
Here are 10 provisions from the document that could affect clients who have, or who are considering, life insurance, health insurance or long-term care insurance.
Numbers for Life Insurance and Estate Planning
- Unified Credit Against Estate Tax
To $11.58 million for a decedent dying in 2020, from $11.4 million for a decedent dying in 2019.
- Gift Tax Exclusion
The exclusion for 2020 will be $15,000 for gifts to any person, and $157,000 for gifts to a spouse who is not a citizen of the United States. That compares with 2019 limits of $15,000 for gifts to any person, and $155,000 for gifts to a non-U.S. citizen spouse.
Numbers for Health Insurance and Benefits
- Cafeteria plans
The dollar limit for voluntary employee salary reductions for contributions to health flexible spending arrangements (FSAs) will increase to $2,750, from $2,700.
- 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 2020, the acceptable deductible ranges will be $2,350 to $3,550 for self-only coverage, and $4,750 to $7,100 for family coverage, For 2019, the acceptable deductible ranges are $2,350 to $3,500 for self-only coverage, and $4,650 to $7,000 for family coverage.
The maximum annual out-of-pocket expense limits will increase to $4,750 for individuals and $8,650 for families, from $4,650 for individuals and $8,550 for families.
- Qualified Small Employer Health Reimbursement Arrangement
The maximum eligible employer reimbursement amounts for this program will increase to $5,250 for individual coverage and from $10,600 for family coverage, from $5,150 for individual coverage and $10,450 for family coverage.
- 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 2019, the base “applicable dollar amount” for calculating the penalty was $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, 2019.
Last year, the IRS did not bother to put in an amount for calculating the penalty.
This year, the IRS has left out the section related to the penalty.
- 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.