IRS Issues Inflation-Adjusted Items for 2023

The Internal Revenue Service (IRS) has issued Part III Administrative, Procedural, and Miscellaneous, 26 CFR 601.602. This revenue procedure aims to outline inflation-adjusted items in various Internal Revenue Code (IRC) provisions for 2023. These adjustments apply to taxable years beginning in 2023.

The revenue procedure notes a change that the Inflation Reduction Act of 2022 made to the energy-efficient commercial buildings deduction for taxable years beginning in 2023. The publication next lists the items subject to adjustments due to inflation in 2023. Noteworthy items include the following:

  • Maximum Capital Gains Rate – Changes in the maximum zero rate amounts and maximum 15 percent rate amounts under § 1(j)(5)(B);
  • Refundable Credit for Coverage Under a Qualified Health Plan – The limitation on the tax imposed under § 36B(f)(2)(B) for excess advance credit payments is recalculated using a new table;
  • Employee Health Insurance Expense of Small Employers – The dollar amount in effect in 2023 under § 45R(d)(3)(B) is $30,700 for the purposes of limiting the small employer health insurance credit and determining who is a small employer for the credit;
  • Cafeteria Plans – The dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements is $3,050 under § 125(i), with a maximum carryover amount of $610, if permissible under the plan;
  • Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments Purchased for a Yield Restricted Defeasance Escrow – Defines the reasonable of these broker commissions under § 1.148-5(e)(2)(iii)(B)(2);
  • Limitations on Cash Method of Accounting – Adjusts the average annual gross receipt amount over the relevant three-year taxable period for the gross receipts test of § 448(c) to $29,000,000;
  • Tax on Insurance Companies Other than Life Insurance Companies – Adjusts the amount of the limit on the net or direct written premiums under § 831(b)(2)(A)(i) to elect the alternative minimum tax for certain small companies;
  • Periodic Payments Received Under Qualified Long-Term Care Insurance Contracts or Under Certain Life Insurance Contracts – Adjusts the stated dollar amount of the per diem limitation under § 7702B(d)(4) regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid because of the death of a chronically ill individual.
  • Qualified Small Employer Health Reimbursement Arrangement – Adjusts the limit of payment and reimbursements for any year to be eligible as a qualified small employer health reimbursement arrangement under § 9831(d).

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