On Oct. 9, 2025, the IRS released Revenue Procedure 2025-32 (Rev. Proc. 25-32), which includes 2026’s inflation-adjusted limits for health flexible spending accounts (FSAs). For plan years beginning in 2026, the adjusted dollar limit on employees’ pre-tax contributions to health FSAs increases to $3,400. This is a $100 increase from the 2025 limit of $3,300.
As background, the Affordable Care Act (ACA) imposes a dollar limit on employees’ salary reduction contributions to health FSAs. This limit started at $2,500 for plan years beginning on or after Jan. 1, 2013, and has been adjusted for inflation for subsequent plan years. Employers should ensure their health FSAs will not allow employees to make pre-tax contributions over $3,400 for the 2026 plan year.
As an exception to the use-or-lose rule, employers with health FSAs may allow employees to carry over a certain amount of funds remaining at the end of a plan year to reimburse eligible expenses incurred in the plan year immediately following. The maximum carryover amount is adjusted annually for inflation. For 2026, Rev. Proc. 25-32 increases the maximum carryover limit to $680 (from $660 for 2025).
In addition, Rev. Proc. 25-32 includes cost-of-living adjustments for qualified transportation fringe benefits for 2026. Federal tax law allows employers to offer qualified transportation benefit programs to their employees on a tax-free basis, subject to a maximum monthly amount. Both employee pre-tax salary deferrals and employer-paid benefits, if any, count toward the maximum amount.
For 2026, the combined monthly limit for transportation in a commuter highway vehicle and a transit pass increases to $340, up from $325 in 2025. The monthly limit in 2026 for qualified parking also increases to $340 from $325.
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