IRS Revenue Procedure 2017-58 sets out the 2018 inflation adjustments for several benefit programs: health flexible spending arrangements (FSAs), qualified transportation fringe benefits, qualified adoption assistance programs, penalties related to the Affordable Care Act (ACA) individual mandate and qualified long-term care (LTC) premiums.

The limits also include indexed dollar amounts for the federal income tax-related personal exemption and standard deduction, the qualified retirement plan limits released in Notice 2017-64 and the recently announced Social Security taxable wage base.1

The 2018 tax limits may affect design, administration, communication and tax reporting for these benefits.

Health flexible spending arrangements 2018 2017
Maximum annual health FSA salary reduction contribution (applies to both general purpose and limited purpose health FSAs) $2,650 $2,600
Qualified transportation fringe benefits 2018 2017
Monthly limitation amounts
— Transit pass and vanpooling (combined) $260 $255
— Qualified parking $260 $255
Qualified adoption assistance 2018 2017
Maximum per adoption income tax exclusion
— Child with special needs (regardless of actual expenses) $13,840 $13,570
— Other adoptions $13,840 $13,570
Adjusted gross income (AGI) tax exclusion phaseout
— Phaseout begins $207,580 $203,540
— Phaseout complete $247,580 $243,540
ACA individual mandate per adult penalty2 2018 2017
Annual flat dollar penalty for failure to enroll in minimum essential health coverage $695 $695
Dependent care assistance (including flexible spending arrangements)3 2018 2017
Maximum annual dependent care assistance benefit
— Individual or a married couple filing jointly $5,000 $5,000
— Married individual filing separately $2,500 $2,500
Qualified retirement plan limits 2018 2017
Maximum recognizable compensation $275,000 $270,000
Highly compensated employee (HCE) $120,000 $120,000
Section 415 benefit limits
— Defined benefit plans $220,000 $215,000
— Defined contribution plans $55,000 $54,000
Limit on pretax elective deferrals
— Under age 50 $18,500 $18,000
— Age 50 and over $24,500 $24,000
Qualifying longevity annuity contract (QLAC) 2018 2017
Investment limit $130,000 $125,000
Social Security taxable wage base4 2018 2017
Taxable wage base $128,400 $127,200
Long-term care premiums 2018 2017
Annual limitation on LTC premiums includible as medical care
Age before close of tax year
— 40 or less $420 $410
— More than 40 but not more than 50 $780 $770
— More than 50 but not more than 60 $1,560 $1,530
— More than 60 but not more than 70 $4,160 $4,090
— More than 70 $5,200 $5,110
Standard deduction 2018 2017
Filing status
— Married individuals filing jointly $13,000 $12,700
— Heads of households $9,550 $9,350
— Unmarried individuals $6,500 $6,350
— Married individuals filing separately $6,500 $6,350
Personal exemption 2018 2017
Exemption amount $4,150 $4,050

Endnotes

1. The 2018 limits for health savings accounts were released earlier this year. See “IRS announces 2018 limits for HSAs and HDHPs,” Willis Towers Watson Insider, May 2017.

2. The annual penalty generally equals the greater of the flat-dollar amount or 2.5% of household income in excess of the income tax return filing threshold.

3. The dependent care assistance limits are not adjusted for inflation — adjustments require a legislative amendment to the tax code.

4. On November 27, the Social Security Administration lowered the previously announced 2018 taxable wage base from $128,700 to $128,400.