Sarah Borders November 4, 2025 14 min read

IRS Releases 2026 Inflation Adjustments, Including FSA Maximums

The IRS issued Rev. Procedure 2025-32 listing certain tax inflation adjustments for a wide variety of benefits arrangements, including health FSA contribution limits, qualified transportation and parking benefits, qualified small employer health reimbursement arrangements (QSEHRAs), the small employer health insurance credit, and other adjustments for the 2026 tax year. These adjustments are outlined below:

	2025	2026
Health Flexible Spending Accounts (Health FSAs)
Health FSA Annual Employee Contribution Limit	$3,300 for Health FSA plan year starting in 2025	$3,400 for Health FSA plan year starting in 2026
Note: Employers can contribute additional funds to health FSAs above these limits, up to what the employee contributes (or up to $500 regardless what the employee contributes).
Health FSA Carryover (Always 20%)	$660 may be carried over to a plan year beginning in 2026	$680 may be carried over to a plan year beginning in 2027
§132(f) Commuter Benefits
Qualified Parking	$325/mo.	$340/mo.
Qualified Transit/Vanpool	$325/mo.	$340/mo.
§137 Adoption Assistance
Maximum Employer Adoption Assistance Excludable from Income	Up to $17,280; Credit begins to phase out at $259,190	Up to $17,670; Credit begins to phase out at $265,080
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs)
Self-Only Annual Limit	$6,350	$6,450
Family Annual Limit	$12,800	$13,100
Small Employer Health Insurance Credits
Maximum credit is phased out based on average wages and the number of full-time equivalent employees in excess of 10	Credit begins to phase out at $33,300 average annual wage	Credit begins to phase out at $34,100 average annual wage
Penalty for Failure to Provide ACA Information Returns (Forms 1094/1095-B and/or -C)
	Penalty for 2025 forms 1094/1095 due in early 2026	Penalty for 2026 forms 1094/1095 due in early 2027
Failure corrected within 30 days of due date	$60	$60
Failure corrected by August 1 immediately after due date	$130	$130
Failure corrected after August 1	$340	$340
Intentional disregard	$680 or more	$690 or more
Note: All penalties may be assessed twice, once for forms owed to employee/beneficiary, and again for forms owed to the IRS. While penalty caps may apply based on the employer’s gross receipts, they are rather high caps and also apply separately for forms not provided to employees versus forms not provided to the IRS. No cap applies for intentional disregard.

Employers providing any of the applicable arrangements need to ensure amounts are adjusted and communicated to employees, and plan documents are updated accordingly.

Sarah Borders

Principal, Benefits Compliance Solutions. Sarah has spent the last 15 years in the employee benefits industry, has numerous designations and serves on NAHU’s Employer Working Group Subcommittee and is an active board member of Austin AHU. She recently stepped down as Vice President of Benefits Compliance at one of the nation's largest brokerage firms to start her own compliance consulting practice. Her designations include an active license with the Texas Department of Insurance, CEBS (Certified Employee Benefits Specialist), Certified Health Care Reform Professional, HIPAA certification and Health Care Service Associate. She holds an MBA from Texas A&M Corpus Christi and a BA from University of Incarnate Word. Her consulting firm, Benefits Compliance Solutions, partners with employers to identify unknown risks and avoid hundreds of thousands of dollars in fines and lawsuits from failure to comply with their healthplan obligations.