Flexible Spending Account (FSA) Limit Rises to $2500 for 2015

The IRS has recently released Revenue Procedure 2014-61, which provides tax info for the upcoming year on numerous employee benefits.

In 2015, the limit on employee contributions to employer-sponsored health care flexible spending accounts (FSAs) will increase to $2,550 (up $50 from 2014). For dependent-care FSAs and dependent care assistance plans, the limit will remain at $5,000 dollars for qualified individuals and those married and filing jointly. The limit for married filing separately will remain at $2,500.

Something that actually started this year but is expected to become more widely adopted in 2015 is the altered “use it or lose it rule”. The altered rule allows employers to offer a carryover of up to $500 in unused health FSA funds the following year or to continue a grace period option giving employees a two-and-a-half month extension to spend remaining FSA funds. However, the FSA cannot have both options, and employers are not required to offer either option.

Also set to increase in 2015 is the adoption tax credit, which will be up $210 to $13,400. The phase out for this tax credit will start with those who have a modified adjusted gross income over $201,010 and is completely phased out at $241,010.

The small business health care tax credit phase out is also getting a small increase. This credit is phased out based on the number of full-time employees in excess of 10 and the average annual wages over $25,800 for tax year 2015, which is up $400 from 2014.

The income tax brackets will also be going up, as they do every year. In particular the top tax bracket of 39.6%, is now for singles whose income exceeds $413,200 ($464,850 for married filing jointly), up $6,450 and $7,250 respectively.

Another change is to PCORI, or Patient-Centered Outcomes Research Institute, fees. The PCORI fee applies on a plan year basis to self-insured plans and health insurers. Since October 1st 2014 the fee has gone up 8 cents to $2.08.

Employers subject to the fee must submit it by July 31 of the year immediately following the last day of the plan year.

By William Cruse, Associate Accountant

Davis and Hodgdon Associates CPAs has been assiting nonprofits, individuals and businesses with tax and accounting services in the Burlington Vermont Metro area for more than 20 years. If you have any questions or concerns please feel free to call 802.878.1963 or email [email protected].