IRS Releases 2026 Inflation Adjustments, Including FSA Maximums
The IRS has issued Revenue Procedure 2025-32, outlining tax inflation adjustments for a range of benefit arrangements for the 2026 tax year. These include updates to health FSAs, transportation benefits, adoption assistance, and more.
Key updates include:
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Health FSAs: The 2026 contribution limit increases to $3,400, up from $3,300 in 2025. The maximum carryover amount rises to $680.
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Qualified Transportation & Parking: The monthly limit increases to $340 for both transportation and parking benefits (up from $325).
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QSEHRAs: The cap for Qualified Small Employer Health Reimbursement Arrangements increases to $6,450 for self-only coverage and $13,100 for family coverage.
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Adoption Assistance: The maximum exclusion rises to $17,670. This begins phasing out at $265,080 in modified adjusted gross income, fully phasing out at $305,080.
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Small Employer Health Insurance Credit: The average annual wage level where the credit phases out increases to $34,100 (up from $33,300).
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ACA Information Returns: Penalties for failing to file or furnish Forms 1094/1095-B/C in 2027 for calendar year 2026 remain the same at $340 per return, with reduced penalties for timely corrections.
Employers offering any of these benefit arrangements should ensure plan documents, payroll systems, and communications are updated accordingly.