2018 Inflation Limit for HDHP Family Coverage Changed Back


The IRS has modified the annual limit on deductions for contributions to Health Savings Accounts (HSAs) allowed for individuals with family coverage under a high deductible health plan (HDHP) for calendar year 2018 that was announced in Rev. Proc. 2018-18, I.R.B. 2018-10, 392. For 2018, taxpayers may treat $6,900 as the annual limitation on the deduction for an individual with family coverage under an HDHP.

The IRS initially released inflation adjustments for HSAs (and other tax items) in Rev. Proc. 2017-37, I.R.B. 2017-21, 1252. Under that revenue procedure, the annual limit on deductions for an individual with family coverage under an HDHP was pegged at $6,900 for 2018. Congress subsequently changed the method by which many inflation adjustments are made in the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97). In response to the method change, the IRS released Rev. Proc. 2018-18, superseding Rev. Proc. 2017-37, to reflect the statutory amendments to the inflation adjustments. Under Rev. Proc. 2018-18, the annual limitation on deductions for an individual with family coverage under an HDHP was $6,850 for 2018.

In response to numerous complaints, the IRS has determined that it is in the best interest of sound and efficient tax administration to allow taxpayers to treat the $6,900 annual limitation originally published in Rev. Proc. 2017-37 as the 2018 inflation adjusted limitation on HSA contributions for eligible individuals with family coverage under an HDHP.

An individual who receives a distribution from an HSA of an excess contribution (with earnings) based on the $6,850 deduction limit may repay the distribution to the HSA and treat the distribution as the result of a mistake of fact due to reasonable cause. Alternatively, an individual who receives a distribution from an HSA of an excess contribution (with earnings) based on the $6,850 deduction limit published in Rev. Proc. 2018-18 and does not repay the distribution to the HSA may treat the distribution as excess contributions returned before the due date of return.

Rev. Proc. 2018-18, I.R.B. 2018-10, 392, is modified, and the second sentence of section 4 is superseded.