IRS Announces 2024 Inflation Adjusted Limits for Health FSAs, Commuter Benefits, and Adoption Assistance

On November 9, 2023, the IRS issued Revenue Procedure 2023-34, providing certain cost-of-living adjustments for a wide variety of tax-related items, including health FSA contribution limits, transportation and parking benefits, qualified small employer health reimbursement arrangements (QSEHRAs), the small business tax credit, and other adjustments for tax year 2024. Those changes are outlined below.

• Health FSA . The annual limit on employee contributions to a health FSA will be $3,200 for plan years beginning in 2024 (up from $3,050 in 2023). In addition, the maximum carryover amount applicable for plans that permit the carryover of unused amounts is $640 (up from $610 in 2023).
• Dependent Care Assistance Program (DCAP) . The annual limit on employee contributions to a DCAP will remain at $5,000/$2,500 for 2024 and future years unless extended or amended by Congress.
• Qualified Transportation Fringe Benefits . For 2024, the monthly limit on the amount that may be excluded from an employee's income for qualified parking increases to $315, as does the aggregate fringe benefit exclusion amount for transit passes (both up from $300 in 2023).
• QSEHRAs . For 2024, the maximum number of reimbursements under a QSEHRA may not exceed $6,150 for self-only coverage and $12,450 for family coverage (up from $5,850 and $11,800 in 2023).
• Adoption Assistance Program. The maximum amount an employee may exclude from his or her gross income under an employer-provided adoption assistance program for the adoption of a child will be $16,810 for 2024 (up from $15,950 in 2023). This exclusion begins to phase out for individuals with modified adjusted gross income greater than $252,150 and will be entirely phased out with a $292,150 modified adjusted gross income.

Small Business Healthcare Tax Credit. For 2024, the average annual wage level at which the credit phases out for small employers is $32,400 (up from $30,700 in 2023). Employers with limits that are changing (such as for health FSAs, transportation/commuter benefits, and adoption assistance) will need to determine whether their plans automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees. For more information, download a copy of our Employee Benefits Annual Limits publication.

IRS Revenue Procedure 2023-34 »