The Internal Revenue Service is granting relief to taxpayers who have family coverage under a high deductible health plan and who contribute to a health savings account.
For 2018, taxpayers with family coverage under a high deductible health plan, or HDHP, can treat $6,900 as the maximum deductible contribution to their HSA.
A change in the inflation adjustment calculations for 2018 under the new tax reform law, the Tax Cuts and Jobs Act, decreased the maximum deductible HSA contribution for taxpayers with family coverage under an HDHP by $50, to $6,850.
The IRS announced the relief in Revenue Procedure 2018-27 for affected taxpayers and allows the $6,900 limitation to remain in effect for 2018. The $6,900 annual limitation was originally provided in May of last year in Revenue Procedure 2017-37.
The new revenue procedure provides relief for taxpayers with family coverage under HDHPs in terms of the annual deductible contributions limit for their 2018 HSAs under Section 223 of the tax code. The maximum for family coverage was originally issued as $6,900 on May 4, 2017. On March 2, 2018, the limit was reduced to $6,850 for taxpayers with family coverage under HDHPs under the tax reform legislation that changed the calculation for 2018 and future years.
The new guidance allows taxpayers to continue to treat the 2018 limit as $6,900. It also clarifies how taxpayers who have already received a distribution from an HSA of an excess contribution based on the $6,850 deduction limit can treat the distribution as a mistake and repay the HSA without any tax or reporting consequences. The latest guidance also clarifies how to treat a distribution of an excess contribution (and earnings) based on the $6,850 deduction limit.
If you have any questions or if you would like more information, contact Fred Schutz at (856) 722-5300 ext. 201 or Dave Gill at ext. 210.