Thanks to the Tax Cuts and Jobs Act (TCJA), inflation-adjusted amounts are now indexed using the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). Because of this, the maximum deductible Health Savings Account (HSA) contribution for taxpayers with family coverage under a High Deductible Health Plan (HDHP) was reduced from $6,900 to $6,850. In a recent Revenue Procedure, the IRS announced that for 2018 taxpayers may treat $6,900 as the annual limitation on deductions under IRC Sec. 223(b)(2)(B) for an individual with family coverage under an HDHP. In addition, the Revenue Procedure instructs taxpayers how to treat a prior distribution based on the $6,850 deduction limit as a mistake and repay the HSA without any tax or reporting consequences. It also clarifies how to treat a distribution of an excess contribution (and earnings) based on the $6,850 deduction limit. Rev. Proc. 2018-27, 2018-20 IRB . Contact the tax professionals at Ketel Thorstenson (KTLLP) with any further questions on Health Savings Accounts (HSA) or Tax Reform effects.
Ketel Thorstenson, LLP, has over 60 CPA’s on staff and has been serving clients across the region since 1936. With offices in Rapid City, Spearfish, and Custer SD, the firm offers a variety of services including tax planning and return preparation, audit services, QuickBooks, bookkeeping, payroll, business valuation and estate planning.