written by Blair Groves
This is part two of Key Tax Developments in 2014. Click here to read part one. The following is a summary of the most important developments that have occurred in the past three months that may affect you.
Employer health insurance tactic may backfire
The IRS has warned of costly consequences to an employer that doesn’t establish a health insurance plan for its employees, but reimburses them for premiums they pay for health insurance. According to the IRS, these arrangements are considered to be group health plans and are subject to the market reforms of the Affordable Care Act. These reforms include the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. These type of arrangements cannot be integrated with individual policies to satisfy the market reforms. Employers may be subject to a $100 per day excise tax per applicable employee if they do not meet the reforms.
More trust/estate expenses escape deduction limit
Miscellaneous itemized deductions are allowed only to the extent they exceed 2% of Adjusted Gross Income (AGI). The AGI of an estate or trust is calculated the same way as for an individual, subject to certain exceptions. One of these such exceptions is that costs incurred in connection with the administration of and estate or trust that wouldn’t have been incurred if the property weren’t held there are allowed as deductions to AGI. The IRS has recently issued final regulations which list more trust/estate expenses that are deductible in calculating AGI. For additional information, click here http://www.irs.gov/irb/2014-22_IRB/ar05.html.
Next year’s inflation adjustments for health savings accounts
Eligible individuals may, subject to statutory limits, make deductible contributions to a health savings account. In general, a person is considered eligible if he or she is covered under a high deductible health plan (HDHP) and is not covered under any other plan that is not high deductible, unless the other coverage is permitted insurance. For 2015, a plan is considered high deductible if the annual deductible no less than $1,300 and out-of-pocket expenses no greater than $6,450 for self only coverage. Limits are doubled for family coverage. The limitation on deductions is $3,350 for an individual with self-only coverage and $6,650 for an individual with family coverage. These amounts go up by $1,000 if the individual is 55 or older.
For more information regarding these developments, please contact us at 417-881-0145.