New Tax Law Repeals Individual Mandate, Eliminates Tax Breaks for Several Fringe Benefits
President Trump has signed into law the Tax Cuts and Jobs Act, which, among other things, effectively repeals the Affordable Care Act's individual mandate beginning in 2019, eliminates tax breaks for several fringe benefits, and creates a new tax credit for employers offering paid family and medical leave.
Individual Mandate Repeal Effective in 2019
Under the Affordable Care Act, individuals are currently required to have minimum essential healthcoverage, qualify for an exemption from the requirement, or pay a penalty tax. This ACA provision is known as the "individual mandate." Effective in 2019, the individual mandate is effectively repealed, as the penalty tax for noncompliance with the mandate will be reduced to $0.
Tax Breaks for Several Fringe Benefits Eliminated
Effective in 2018, the tax treatment of certain fringe benefits will be impacted as follows:
- Employer contributions to an employee's qualified transportation fringe benefits (including those for employees'transit passes and parking) will no longer be deductible from the employer's gross income.
- Qualified moving expense reimbursements made by an employer will generally no longer be excludable from an employee's gross income.
- Qualified bicycle commuting reimbursements made by an employer will no longer be excludable from an employee's gross income.
New Employer Tax Credit for Paid Family and Medical Leave
For tax years 2018 and 2019, employers that offer paid family and medical leave (as defined under the federal Family and Medical Leave Act [FMLA]) to employees may qualify for a newly established tax credit of up to 25% of the annual wages paid to those employees.
To learn more about the tax consequences of various employer-provided benefits, visit our Employee Benefits section.
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