Many medical tax amounts affected in 2017 by inflation

Welcome to Part 5 of the ol’ blog’s series on 2017 inflation adjustments. We’re halfway through the series, and you can find links to all 2017 inflation posts in the first item: Income Tax Brackets and Rates. Today we look at changes to some medical tax provisions.Note: The 2017 figures apply to 2017 returns that are due in 2018. For comparison purposes, you’ll also find 2016 amounts to be usedin filing 2016 returns due next April. How are you feeling? If not so well, then by all means get to the doctor. And be sure to use some tax code provisions that are great prescriptions to treat those necessary medical costs. Many of the tax laws connected to medical situations are adjusted each year for inflation. Here are how the inflation figures affect flexible spending accounts, health savings accounts, long-term care policy premiums and even the amount of penalty you could face if you don’t have insurance coverage that meets Obamacare requirements. Flexible spending account (FSA)  A medical flexible spending account, or FSA, is a great and tax-saving way to pay for health costs that aren’t covered by your insurance. How much you put into this workplace benefit also is indexed for inflation. The base FSA amount for a health-related account was set at $2,500 under the Patient Protection and Affordable Care Act, also referred to as the ACA and/or Obamacare. The health care law also provides for possibility of the FSA limit increasing in $50 increments depending on inflation. The first inflation related increase to the maximum FSA amount came in 2015, when the contribution limit was bumped to $2,550. Because of low inflation, the FSA limit for 2016 stays at $2,550. For 2017, it gets bumped up a bit to $2,600. Health Savings Accounts (HSAs)Some folks opt for medical coverage that has a much higher deductible. In these cases, the premiums tend to be lower. There also are tax advantages to purchasing a high-deductible health plan, or HDHP. When you have this type of coverage, you can open a special savings account, known as a Health Savings Account or HSA, to pay for your larger deductibles. HSAs have several tax benefits: Contributions to the HSA are fully deductible up to the legal limit. Withdrawals to pay qualified medical expenses, including dental and vision treatments, are not taxed. Interest earnings accumulate tax-deferred and if used to pay qualified medical expenses, are tax-free. Unlike an FSA, unused HSA money isn’t forfeited at the end of the year, but continues to grow tax-deferred. Earlier this year, the IRS announced the 2017 inflation adjustments for HSAs. The table below shows the HSA contribution and maximum out-of-pocket limits for high-deductible coverage for the 2016 and 2017 tax years. Contribution and Out-of-Pocket Limits  for Health Savings Accounts and High-Deductible Health Plans   2016  2017 HSA contribution limit Self-only: $3,350 Family: $6,750 Self-only: $3,400 Family: $6,750 HSA catch-up contributions (age 55 or older)  $1,000 $1,000 HDHP minimum deductibles  Self-only: $1,300 Family: $2,600 Self-only: $1,300 Family: $2,600 HDHP maximum out-of-pocket amounts                                        Self-only: $6,550 Family: $13,100 Self-only: $6,550 Family: $13,100 Individuals eligible to make catch-up contributions, which are not indexed for inflation, can do so any time during the year in which they turns 55. Long-term care coverage premiums In addition to medical insurance, many folks buy long-term care insurance to help them pay for the assistance they might need when they are elderly, either in their homes or in an assisted living facility or nursing home. The Internal Revenue Code says that premiums for a long-term care policy are deductible up to a certain amount as an itemized medical expense. The maximum deduction is based on your age and the amounts that can be claimed on Schedule A are adjusted for inflation. In 2017, with the 2016 amounts included for comparison, the maximum amount of long-term care premiums that can be deducted are:  Age by the end  of the tax year 2016 2017  40 or younger $390 $410  41 to 50 $730 $770  51 to 60  $1,460 $1,530  61 to 70  $3,900 $4,090  71 and older  $4,850 $5,110   Remember, for the 2016 tax year, filers age 65 or older can claim medical expenses that exceed 7.5 percent of their adjusted gross income. In 2017, everyone regardless of age, must have itemized medical expenses that exceed 10 percent of their AGI. Obamacare penaltyBy now, folks know that if they don’t have minimal essential health care coverage for the whole year, they will face a penalty that is collected when they file their tax returns. The penalty applies for each month where a person fails to have an ACA acceptable policy. Beginning with the 2017 tax year, that amount is indexed for inflation. But because inflation is low, the 2017 dollar amount used to calculate the no-MEC penalty remains at the 2016 level of $695. So how are you feeling now? I hope all this tax talk has helped, at least will improve your tax-saving prognosis.

Article Source From:
Many medical tax amounts affected in 2017 by inflation