Plan administrators and employers that offer adoption assistance and long-term care (LTC) insurance need to adjust their plans for 2012 to account for increased amounts that can be excluded from taxable income. The IRS issued the rates for use in 2012 in Revenue Procedure (Rev. Proc.) 2011-52.
Adoption Tax Credit
The tax credit under Code Section 23 for taxable years beginning in 2012 for adoptions will be as follows:
- for adoption of a child with or without special needs, the credit will be $12,650; and
- the credit begins to phase out for taxpayers with modified adjusted gross income (AGI) of more than $189,710, up from the 2011 rate of $185,210; the credit phases out completely with an AGI of $229,710 or more.
Adoption Assistance Exclusion
The exclusion under Code Section 137 for adoption assistance for taxable years beginning in 2012 will be as follows:
- for adoption of a child with or without special needs, the exclusion will be $12,650; and
- The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified AGI of more than $189,710, up from the 2011 rate of $185,210; the exclusion phases out completely with an AGI of $229,710 or more.
LTC Insurance Thresholds
The LTC insurance limitations on premiums for 2012 will be as follows:
- age 40 or younger: $350
- ages 41-50: $660
- ages 51-60: $1,310
- ages 61-70: $3,500
- ages 71 or older: $4,370
The LTC daily benefit cap will be $310 for 2012, up $10 from the 2011 level of $300.