2010 Transportation, Adoption Assistance and Dependent Care Plan Limits

The IRS has released the 2010 cost-of-living adjustments (COLAs) for qualified transportation fringe benefits, adoption assistance and dependent care plans.

Qualified Transportation Fringe Benefits. For 2010, the monthly limit on the amount that may be excluded from an employee's income for qualified parking benefits will be $230, which is unchanged from the 2009 limit. The combined limit for transit passes and vanpooling expenses is also unchanged at $230 due to the American Recovery and Reinvestment Tax Act of 2009 (ARRA), which requires that the two limits be the same through December 2010.

Adoption Assistance Exclusion/Adoption Credit. The maximum amount that may be excluded from an employee's gross income under an employer-provided adoption assistance program (under Code Section 137 ) for the adoption of a child will be $12,170 for 2010 (a $20 increase from 2009). In addition, the maximum adoption credit allowed to an individual (under Code Section 23 ) for the adoption of a child will be $12,170 for 2010. Both the exclusion and the credit will begin to be phased out for individuals with a modified adjusted gross income greater than $182,520 ($340 higher than 2009), and will be entirely phased out for individuals with a modified adjusted gross income of $222,520 or more (also $340 higher than 2009).

DCAPs. The $5,000/$2,500 DCAP limit has not changed?it is a non-indexed limit. But some general 2010 tax limits are relevant to the federal income tax savings under a DCAP?these include the 2010 tax rate tables, the personal exemption amount, and the standard deduction amounts. There are also new limits for the earned income credit and the child tax credit (including temporary changes under ARRA). These amounts are relevant when calculating a participant's federal income tax savings from claiming the dependent care tax credit (DCTC) versus participating in a DCAP.

October 16, 2009 · Categories: General, Transportation · Read article »