Contributions limits, taxable income & more
The IRS has recently released some important updates you’ll need to know for the fourth quarter of this year.
- Contribution limits for health savings accounts (HSAs) The IRS has released the maximum contribution limit for HSAs when employees are participating in a high-deductible health plan (HDHP). For employees with individual coverage, the HSA contribution limit will be $3,650 in 2022. Employees with family coverage will be able to contribute a maximum of $7,300 to an HSA next year. For 2022, an HDHP is a health pan with an annual deductivle of at least $1,400 (self-only) or $2,800 (family) and out-of-pocket expenses of $7,050 (self-only) or $14,100 (family).
- Taxing dependent care benefits As part of IRS tax relief during COVID-19, employers can amend cafeteria plans to allow carryover amounts or an extended time period for claims. This includes benefits from qualified dependent care assistance programs. In Notice 2021-26, the IRS said that any carryover amounts or amounts used during extended claim periods for dependent care assistance that would’ve been excluded from employees’ income during the previous tax year will remain excluded from income for tax years 2021 and 2022. Also, exclusion limits for those tax years don’t have to be reduced.
- Premium tax credit Rev. Proc. 2021-23 updates the percentage table the IRS uses to determine if someone’s eligible for a premium tax credit with temporary percentages implemented by the American Rescue Plan Act. Note: These changes don’t affect the required contribution percentage used to determine if an individual is eligible for employer-sponsored minimum essential health coverage in 2021. This figure remains 9.83%.