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2024 Health FSA Contribution Limits Increase to $3,200 Carryover up to $640
The Internal Revenue Service today announced the tax year 2024 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2023-234 provides details about these annual adjustments.
Health FSA Highlights of changes in Revenue Procedure 2023-234:
For the taxable years beginning in 2024, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases $150 to $3,200. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640, an increase of $30 from taxable years beginning in 2024.
The chart below shows the adjustment in health FSA contribution limits for 2023. Employers may set lower limits for their workers.
Health Flexible Spending Accounts
(Includes limited-purpose FSAs) |
2024 |
2023 |
Change |
| Maximum salary deferral contribution |
$3,200 |
$3,050 |
+$150 |
| Maximum carryover amount |
$640
|
$610 |
+$30 |
See: https://www.irs.gov/newsroom/irs-2024-flexible-spending-arrangement-contribution-limit-rises-by-150-dollars
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A Section 125 plan Health Flexible Spending Account (FSA) allows employees to use up to $2,850 (2022 plan year) and $3,050 (2023 plan year) in pre-tax dollars to pay for eligible out-of-pocket medical, dental and vision care expenses not covered by other insurance.
The Health FSA reduces payroll taxes for both the employer and the employee, making it a popular benefit option. For the employee it’s like getting a 30% to 40% discount on medical, dental and vision care. The employer realizes up to 8 to 10% in matching FICA and other tax savings.
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