Expansion of Adoption Credit, Adoption Assistance Programs
For 2010, the maximum adoption credit is increased to $13,170 per eligible child (a $1,000 increase). This increase applies to both non-special needs adoptions and special needs adoptions. Also, the adoption credit is made refundable. The new dollar limit and phase-out of the adoption credit are adjusted for inflation in tax years beginning after Dec. 31, 2010. Also, the scheduled sunset of EGTRRA provisions relating to the adoption credit is delayed for one year (i.e., the sunset becomes effective for tax years beginning after Dec. 31, 2011).
For adoption assistance programs, the maximum exclusion is increased to $13,170 per eligible child (a $1,000 increase). The new dollar limit and income limitations of the employer-provided adoption assistance exclusion are adjusted for inflation in tax years beginning after Dec. 31, 2010. The EGTRRA sunset of provisions relating to adoption assistance programs is also delayed for one year (i.e., the sunset becomes effective for tax years beginning after Dec. 31, 2011).
The act requires businesses to file an information return (e.g., a Form 1099) for all payments aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation). The provision is effective for payments made after Dec. 31, 2011.
In the case of an applicable self-insured health plan, new IRC § 4376 imposes a fee equal to two dollars (one dollar in the case of policy years ending during fiscal year 2013) multiplied by the average number of lives covered under the plan. For any policy year beginning after September 30, 2014, the dollar amount is equal to the sum of: (1) the dollar amount for policy years ending in the preceding fiscal year, plus (2) an amount equal to the product of (A) the dollar amount for policy years ending in the preceding fiscal year, multiplied by (B) the percentage increase in the projected per capita amount of National Health Expenditures, as most recently published by the Secretary before the beginning of the fiscal year. The plan sponsor is liable for payment of the fee.
The fee is effective with respect to policies and plans for portions of policy or plan years beginning on or after Oct. 1, 2012.
Under the act, the employee portion of the hospital insurance tax part of FICA, currently amounting to 1.45% of covered wages, is increased by 0.9% on wages that exceed a threshold amount. The additional tax is imposed on the combined wages of both the taxpayer and the taxpayers spouse, in the case of a joint return. The threshold amount is $250,000 in the case of a joint return or surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case.
For self-employed taxpayers, the same additional hospital insurance tax applies to the hospital insurance portion of SECA tax on self-employment income in excess of the threshold amount.
The provision applies to remuneration received and tax years beginning after Dec. 31, 2012.
The act mandates that the maximum amount available for reimbursement of incurred medical expenses of an employee, the employees dependents, and any other eligible beneficiaries with respect to the employee, under a health flexible spending account for a plan year (or other 12-month coverage period) must not exceed $2,500. The provision is effective for tax years beginning after Dec. 31, 2012.
Medical Care Itemized Deduction Threshold
The threshold for the itemized deduction for unreimbursed medical expenses is increased from 7.5% of AGI to 10% of AGI for regular income tax purposes. This is effective for tax years beginning after Dec. 31, 2012, except that for 2013, 2014, 2015 and 2016, if either the taxpayer or the taxpayer's spouse turns 65 before the end of the tax year, the increased threshold does not apply and the threshold remains at 7.5% of AGI.
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