The IRS released cost-of-living-adjustments (COLAs) for 2022 reflecting any increases in the flexible spending arrangements (FSA) deferral limit, foreign earned income exclusion, and excludable transportation fringes, among other changes [Rev. Proc. 2021-45, 11-10-21].
Qualified transportation fringes
The amounts that may be excluded from gross income for employer-provided qualified transportation fringe benefits (transportation in a commuter highway vehicle and any transit pass) and qualified parking for 2022 increase to $280 ($270 in 2021).
For plan years beginning in 2022, the dollar limitation under IRC §125(i) on voluntary employee salary reductions for contributions to health FSAs increases to $2,850 ($2,750 in 2021). For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount increases to $570 ($550 in 2021).
The standard deduction amounts for 2022 increase to $25,900 for married couples filing jointly or surviving spouses ($25,100 in 2021), $12,950 for single taxpayers and married taxpayers filing separately ($12,550 in 2021), and $19,400 for heads of household ($18,800 in 2021).
Federal tax levies
The Tax Cuts and Jobs Act altered the way the amount of wages, salary, or other income exempt from a federal tax levy is calculated. For taxable years beginning in 2022, the dollar amount used to calculate the amount determined under IRC §6334(d)(4)(B) increases to $4,400 ($4,300 in 2021).
Foreign earned income exclusion
For 2022, the maximum foreign earned income exclusion amount under IRC §911(b)(2)(D)(i) is $112,000 (up from $108,700 in 2021). The maximum amount of the foreign housing cost exclusion is $15,680 (up from $15,218 in 2021).
Medical Savings Account
To be eligible to make contributions to a Medical Savings Account (or to have the employer make the contributions), an employee must be covered by a high deductible health plan. For 2022, a high deductible health plan is a plan with an annual deductible of $2,450-$3,700 for individual coverage (up from $2,400-$3,600 in 2021) and $4,950-$7,400 for family coverage (up from $4,800-$7,150 in 2021). Maximum out-of-pocket expenses can be no more than $4,950 for individual coverage (up from $4,800 in 2021) and $9,050 for family coverage (up from $8,750 in 2021).
Long-term care insurance benefits
If a long-term care insurance contract makes per diem benefit payments, the amount of the payments that is excluded from income in 2022 is capped at $390 per day (down from $400 in 2021).
For 2022, the maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses under an employer’s adoption assistance program is $14,890 (up from $14,440 in 2021). The maximum amount that can be excluded in connection with the adoption of a child with special needs is $14,890 (up from $14,440 in 2021).
The amount excludable from an employee’s gross income begins to phase out for taxpayers with adjusted gross income of $223,410 (up from $216,660 in 2021) and is completely phased out for taxpayers with adjusted gross income of $263,410 (up from $256,660 in 2021).
Qualified small employer HRA
For 2022, a qualified small employer health reimbursement arrangement (QSEHRA) is an arrangement which, among other requirements, makes payments and reimbursements for qualifying medical care expenses of an eligible employee that do not exceed $5,450 (up from $5,300 for 2021), or $11,050 in the case of an arrangement that also provides for payments or reimbursements for family members of the employee (up from $10,700 for 2021).
Pipeline construction industry per diem option
For 2022, an eligible employer may pay certain welders and heavy equipment mechanics up to $19 per hour for rig-related expenses that will be deemed substantiated under an accountable plan (up from $18 in 2021) and up to $12 per hour for fuel (up from $11 in 2021), when paid in accordance with Rev. Proc. 2002-41 (2002-23 IRB 1098).