Fringe Benefit & FSA Updates for 2025

The IRS has announced inflation-adjusted limits for employer-provided fringe benefits and flexible spending arrangements for tax year 2025. Here’s what’s changing:

Qualified Transportation & Parking Benefits

• The monthly limit for both qualified transportation fringe benefits and qualified parking increases to $325 (Up from $315 in 2024)

Employers can continue offering these benefits tax-free up to the new limit.

Health Flexible Spending Arrangements (FSAs)

• The annual salary reduction limit for employee contributions to health FSAs increases to $3,300 (Up from $3,200 in 2024)

• For cafeteria plans that allow carryover of unused FSA funds, the maximum carryover rises to $660 (Up from $640 in 2024)

These adjustments provide greater flexibility for employers and employees in managing pre-tax benefits.