IRS Announces 2024 Health FSA Contribution Cap

Employees can funnel an extra $150 into their health flexible spending accounts (FSAs) next year, the IRS announced Nov. 9.

The annual contribution limit is rising to $3,200 in 2024, up from $3,050 in 2023. The hike is still significant, although it’s a smaller boost than the $200 hike seen this year.

If the employer’s plan permits the carryover of unused health FSA amounts, employees can carry over up to $640 in 2024. That’s up $30 over the 2023 carryover amount, which is $610.

The FSA announcement comes on the heels of the IRS’s announcement for the 2024 401(k) annual contribution limit, released Nov. 1.

It also comes later than usual as most organizations are already in the thick of open enrollment.

The IRS announced the annual health savings account limits back in May. (The annual limit on HSA contributions for self-only coverage will be $4,150 in 2024, a 7.8% increase from the $3,850 limit in 2023. For family coverage, the HSA contribution limit jumps to $8,300 next year, up 7.1% from $7,750 in 2023.)

In addition to the FSA announcement, the IRS released a variety of other inflation-related modifications, including higher federal tax brackets for next year. For 2024, the top rate of 37% applies to individuals with taxable income above $609,350 and married couples filing jointly earning $731,200, the IRS said.

The IRS also boosted figures for a variety of other figures, including:

Adoption Assistance

For taxable years beginning in 2024, the maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $16,810. That’s up from $15,950 in 2023. The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified adjusted gross income in excess of $252,150, and is completely phased out for taxpayers with modified adjusted gross income of $292,150 or more, the IRS said.

Qualified Small Employer HRAs

For taxable years beginning in 2024, to qualify as a qualified small employer health reimbursement arrangement (QSEHRA), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $6,150 for individual coverage (up from $5,850 in 2023) or $12,450 for family coverage (up from $11,800 in 2023), the IRS said.

Commuting Benefit Amounts

Beginning next year, the monthly limit regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass will rise to $315, up from $300 in 2023. The monthly limitation regarding the fringe benefit exclusion amount for qualified parking will also rise to $315, from $300 in 2023.

Employer-funded parking and mass-transit subsidies are tax-exempt for employees. Using pretax income, employees can also pay their own mass-transit or workplace parking costs through an employer-sponsored salary deferral program.

The changes are detailed in Revenue Procedure 2023-34.