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INFLATION: ADJUSTED 2009 FIGURES FOR HEALTH, CHARITABLE, COMPLIANCE AND SPECIAL ENTITY ITEMS
By Bonnie Mackey, CPA, CSEP*, Levin, Silvey, Zelko & Mackey, PA

A number of tax figures are adjusted each year for inflation based on the average Consumer Price Index (CPI) for the 12-month period ending the previous Aug. 31. The Aug. 2008 CPI has been released by the Labor Department. (U.S. Department of Labor, Consumer Price Index (for all-urban consumers), 9/16/2008) Using the CPI for Aug. 2008 (and the preceding 11 months), RIA calculated and reported in a separate article (see Weekly Alert ¶ 23 09/25/2008) the increases for 2009 to the break points in the income tax brackets, the standard deduction, the personal exemption, and a number of other items. This article provides RIA-calculated adjustments for 2009 for health, charitable, compliance and special entity items. Adjustments for the first two items that follow are based on the medical care component of the CPI.

Long-term care premiums. Amounts paid for insurance that covers qualified long-term care services are treated as medical expenses up to specified dollar limits that vary with the age of the taxpayer as of the close of the tax year. For a taxpayer age 40 or younger, the 2009 limit will be $320 (up from $310 in 2008); more than 40 but not more than 50, $600 (up from $580 in 2008); more than 50 but not more than 60, $1,190 (up from $1,150 in 2008); more than 60 but not more than 70, $3,180 (up from $3,080 in 2008); and more than 70, $3,980 (up from $3,850 in 2008).

Payments received under qualified long-term care insurance. Amounts received under a qualified long-term care insurance contract are generally excludable as amounts received for personal injuries and sickness, subject to a per diem limitation, which will be $280 in 2009 (up from $270 in 2008).

Archer MSAs. For Archer medical savings account (MSA) purposes, in 2009, a “high deductible health plan” will be a health plan—

• with an annual deductible of at least $2,000 and not more than $3,000 (up from $1,950 and $2,900), in the case of self-only coverage, and
• with an annual deductible of at least $4,000 and not more than $6,050 (up from $3,850 and $5,800), in the case of family coverage, and
• under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits doesn't exceed—
  .. $4,000 (up from $3,850) for self-only coverage, and
  ... $7,350 (up from $7,050) for family coverage.

Health savings accounts. Inflation-adjusted figures for tax-favored health savings accounts (HSAs) now occur after the release of the March CPI. For the 2009 and 2008 figures for HSAs, see Weekly Alert ¶  20 5/15/2008 .

Insubstantial benefit charitable contribution limitation. Certain de minimis benefits provided by a charity to a donor don't affect the donor's charitable contribution deductions. Under these rules, charitable contributions will be fully deductible in 2009 if (1) the donor makes a minimum payment of $47.50 ($45.50 in 2008) and receives certain benefits with a cost of not more than $9.50 ($9.10 in 2008) or (2) the charity mails or otherwise distributes free unordered “low-cost articles” with a cost of not more than $9.50 ($9.10 in 2008). In addition, charitable contributions will be fully deductible if the benefit received by the donor isn't more than the lesser of $95 (up from $91 in 2008) or 2% of the amount of the contribution.

Dues paid to agricultural or horticultural organizations. Annual dues not exceeding $145 for 2009 (up from $139 in 2008) for membership in an agricultural or horticultural organization won't be unrelated business income despite any benefits or privileges to which members of the organization will be entitled.

Qualified funeral trusts (QFTs). For contracts entered into in tax years beginning after Aug. 29, 2008, there is no limit on the amount of contributions that may be made to a QFT. For contracts entered into in 2008 in tax years beginning before Aug. 30, 2008, contributions to a QFT may not exceed $9,000.

Reporting exemption for exempt organizations with lobbying expenditures. For 2009, social welfare, agricultural and horticultural organizations are exempt from the requirement that they report to their members the portion of their dues allocable to lobbying if 90% or more of their annual dues are received from persons, families, or entities who pay dues of $101 or less (up from $97 for 2008).

Maximum hourly fee for attorneys under Code Sec. 7430(c)(1) . The maximum hourly amount allowed for attorney's fees to a prevailing party under Code Sec. 7430(c)(1) will be $180 an hour for fees incurred in 2009 (up from $170 in 2008).

Mechanics' lien priority over tax liens. The holder of a lien for $6,880 or less for the repair or improvement of a personal residence will have priority over notices of tax liens filed in 2009. This is up from $6,600 in 2008.

Sales price priority over tax liens. A nondealer purchaser of household goods, personal effects, etc. will be protected against a tax lien filed in 2009 if the sales price is not over $1,380. This is up from $1,320 in 2008.

Property exempt from levy. The value of property exempt from levy under Code Sec. 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) may not exceed $8,230 for levies in 2009 (up from $7,900 for 2008). The value of property exempt from levy under Code Sec. 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) may not exceed $4,120 for levies issued in 2009 (up from $3,950 for 2008).