The Internal Revenue Service (IRS) and Social Security Administration have released the cost-of-living (COLA) adjustments that apply to dollar limitations set forth in certain IRS Code Sections. The Consumer Price Index rose and therefore warranted increases in most indexed figures for 2020.
Social Security and Medicare Wage Base
For 2020, the Social Security wage base is $137,700. The Social Security rate of 6.2% is applied to wages up to the maximum taxable amount for the year; the Medicare portion of 1.45% applies to all wages. In addition, individuals are liable for a 0.9 percent “Additional Medicare Tax” on all wages exceeding specific threshold amounts.
| 2017 | 2018 | 2019 | 2020 | |
| Social Security Wage Base | $127,200 | $128,400 | $132,900 | $137,700 |
| Employee Social Security Rate | 6.2% | 6.2% | 6.2% | 6.2% |
| Employee Medicare Rate | 1.45% | 1.45% | 1.45% | 1.45% |
| Total Employee Rate | 7.65% | 7.65% | 7.65% | 7.65% |
| Employer Matching Rate | 7.65% | 7.65% | 7.65% | 7.65% |
Indexed Compensation Levels
For highly compensated and Key Employee definitions.
| 2017 | 2018 | 2019 | 2020 | |
| Highly Compensated Employee | $120,000 | $120,000 | $125,000 | $130,000 |
| Top Paid Group of 20% | $120,000 | $120,000 | $125,000 | $130,000 |
| Key Employee, Officer | $175,000 | $175,000 | $180,000 | $185,000 |
401(k) Plans
| 2017 | 2018 | 2019 | 2020 | |
| Maximum Employee Deferral | $18,000 | $18,500 | $19,000 | $19,500 |
| Catch up allowed for those 50 and over | $6,000 | $6,000 | $6,000 | $6,500 |
Healthcare FSA
| 2017 | 2018 | 2019 | 2020 | |
| Salary Reduction Annual Limit | $2,600 | $2,650 | $2,700 | $2,750 |
Adoption Credit
| 2017 | 2018 | 2019 | 2020 | |
| Phase Out (modified AGI) | $203,540 to $243,540 | $207,140 to $247,140 | $211,160 to $251,160 | $214,520 to $254,520 |
| Adoption Expenses | $13,570 | $13,810 | $14,080 | $14,300 |
The exclusion from income provided through and employer or a Section 125 cafeteria plan for adoption assistance also has a $14,300 limit for the 2020 taxable year. And remember – a participant may take the exclusion from income and the tax credit if enough expenses are incurred to support both programs separately.
Health Savings Account (HSA)
| 2017 | 2018 | 2019 | 2020 | |
| Minimum deductible amounts for the qualifying high-deductible health plan (HDHP) | ||||
| Individual Coverage | $1,300 | $1,350 | $1,350 | $1,400 |
| Family Coverage | $2,600 | $2,700 | $2,700 | $2,800 |
| Maximum contribution levels | ||||
| Individual Coverage | $3,400 | $3,450 | $3,500 | $3,550 |
| Family Coverage | $6,750 | $6,900 | $7,000 | $7,100 |
| Catch up allowed for those 55 and over | $1,000 | $1,000 | $1,000 | $1,000 |
| Maximums for HDHP out-of-pocket expenses | ||||
| Individual Coverage | $6,550 | $6,650 | $6,750 | $6,900 |
| Family Coverage | $13,100 | $13,300 | $13,500 | $13,800 |
Archer Medical Savings Account (MSA)
Although new MSAs are not allowed, maximum contributions to an existing MSA that are attributable to a single-coverage plan is 65% of the deductible amount. Maximum contributions for a family-coverage plan are limited to 75% of the deductible amount. MSA contributions must be coordinated with any HSA contributions for the taxable year and cannot exceed the HSA maximums.
| 2017 | 2018 | 2019 | 2020 | |
| Minimum deductible amounts for the qualifying high-deductible health plan (HDHP) | ||||
| Individual Coverage | $2,250 – $3,350 | $2,300 – $3,450 | $2,350 – $3,500 | $2,350 – $3,550 |
| Family Coverage | $4,500 – $6,750 | $4,550 – $6,850 | $4,650 – $7,000 | $4,750 – $7,100 |
| Maximum contribution levels | ||||
| Individual Coverage – percentage of deductible amount | 65% | 65% | 65% | 65% |
| Family Coverage – percentage of deductible amount | 75% | 75% | 75% | 75% |
| Maximums for HDHP out-of-pocket expenses | ||||
| Individual Coverage | $4,500 | $4,550 | $4,650 | $4,750 |
| Family Coverage | $8,250 | $8,400 | $8,550 | $8,650 |
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
Total amount of payments and reimbursements for any year cannot exceed
| 2017 | 2018 | 2019 | 2020 | |
| Individual Coverage | $4,950 | $5,050 | $5,150 | $5,250 |
| Family Coverage | $10,050 | $10,250 | $10,450 | $10,600 |
Dependent and/or Child Daycare Expenses
Just a reminder that although the daycare expense limit associated with a cafeteria plan is not indexed, the tax credit available through a participant’s tax filing was raised in 2003. The daycare credit must be filed on Form 2441 and attached to the 1040 tax filing form. The limits for the daycare credit expenses are $3,000 of expenses covering one child and $6,000 for families with two or more children. If one of the parents is going to school full time or is incapable of self-care, the non-working spouse would be “deemed” as earning $250 per month for one qualifying child and $500 for two or more qualifying children. This “deemed” earned income is used whether a person is using the employer’s cafeteria plan or taking the daycare credit.
The cafeteria plan daycare contribution limit is $5,000 for a married couple filing a joint return, or for a single parent filing as “Head of Household.” For a married couple filing separate returns, the limit is $2,500 each. The daycare credit is reduced dollar for dollar by contributions to or benefits received from an employer’s cafeteria plan. An employee may participate in their employer’s cafeteria plan and take a portion of the daycare expenses through the credit if they have sufficient expenses in excess of their cafeteria plan annual election, but within the tax credit limits.
Commuter Accounts
| 2017 | 2018 | 2019 | 2020 | |
| Parking – monthly limit | $255 | $260 | $265 | $270 |
| Transit and Vanpooling – monthly limit | $255 | $260 | $265 | $270 |
Long-Term Care
| 2017 | 2018 | 2019 | 2020 | |
| Non-taxable per day payment | $360 | $360 | $370 | $380 |
You can find the Revenue Procedures here.
Standard Mileage Rates
| Purpose | 2017 | 2018 | 2019 | 2020 |
| Business | .535 | .545 | .58 | TBD |
| Medical/Moving | .17 | .18 | .20 | TBD |
| Charitable | .14 | .14 | .14 | TBD |