Our friends, the IRS, modified the “use-or-lose” rule for health flexible spending arrangements (health FSAs) so that at the plan sponsor’s option, participating employees may carry over up to $500 of unused amounts remaining at year-end. Previously, any amounts that weren’t used by year-end would be forfeited. Certain plan sponsors may be eligible to take advantage of this option as early as plan year 2013.
Health Flexible Spending Accounts
Health FSAs are benefit plans that many employers provide to employees to reimburse employees for health care expenses. The great deal for employees is that qualifying contributions to and withdrawals from FSAs are tax-exempt. Contributions to these FSAs are tax exempt–no tax paid.
Unused FSA contributions left over at the end of a plan year have historically been forfeited to the employer under the so-called “use-it-or-lose-it rule.” With the new changes if you have money left at the end of the year, you can now carryover $500 to the next year and use it in addition to the maximum contributions allowed by your employer’s plan. See all the boring “technical details” right here IRS Notice.
Annual Tax Inflation Adjustments
For tax year 2014, the Internal Revenue Service announced annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes.
The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.
- The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
- The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
- The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
- The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly).
See all the boring details: Here
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