Some employees may be able to eliminate more taxes next year and save more money because the IRS has announced new increased contribution limits to Flexible Spending Accounts (FSA), Health Savings Accounts (HSA), commuter benefits, and more for 2024. The IRS had released HSA limits in May 2023.
FSA Healthcare Contribution limits
As our inflation grows, the IRS recognizes the need to help American employees by increasing the contribution amounts employees can contribute to their health FSA in 2024 by $150, bringing the total to $3,200.
Plans that allow a carryover of unspent FSA funds can now permit up to $640 to rollover in 2024 versus the current maximum of $610.
FSA Limited Purpose Contribution limits
The IRS also increased limits for other plans as well. The Limited Purpose FSA (vision and dental expenses only) maximum was indexed to $3,200 with a similar carryover provision maximum rising to $640.
Commuter Contribution limits
Also indexing upward is the maximum commuter contribution. The monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $315 each, up $15 from the limit for 2023.
Adoption Contribution limits
The maximum amount of an employer subsidy for qualified child adoption expenses for tax year 2024 increased to $16,810 up from $15,950 for 2023.
HSA Contribution limits
Increases in allowed contributions for HSA were announced in May this year. The individual HSA contribution limit will be $4,150 (up from $3,850) and the family contribution limit will be $8,300 (up from $7,750). Workers can contribute to tax-favored HSAs if they are covered by a High Deductible Health Plan (HDHP).
High Deductible Health Plan qualification limits
Qualification for HDHPs are also on the rise. The individual HDHP qualification is $1,600, up $100 from 2023 and the family HDHP qualification will be $3,200 (up $200 from last year).
FSA Day Care Contribution limits
Limits for Day Care Flexible Spending Accounts are unchanged and remain at $5,000 maximum per calendar year ($2,500 if married and filing taxes separately).
The popular FSA and HSA (sponsored by employers) allows employees to redirect their salary and eliminate federal income tax, Social Security and Medicare taxes. A Healthcare FSA lets the employee spend their pre-tax money on medical, dental and vision expenses for themselves, their spouse and tax dependents regardless of insurance coverage. If an employee contributes to an HSA, they cannot contribute to the Healthcare FSA during that time, but can put money into a Limited Healthcare FSA for vision or dental expenses only. However, an employee is allowed to spend HSA funds while participating in a Healthcare FSA.
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