The IRS released cost-of-living-adjustments (COLAs) for 2026 reflecting any increases in excludable transportation fringes and the flexible spending arrangement (FSA) deferral limit, among other changes [Rev. Proc. 2025-32, 10-9-25].
For 2026, the amounts that may be excluded from gross income for employer-provided qualified transportation fringe benefits and qualified parking increase to $340 per month ($325 in 2025).
For plan years beginning in 2026, the dollar limitation for voluntary employee salary reductions for contributions to health FSAs increases to $3,400 ($3,300 in 2025). For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount increases to $680 ($660 in 2025).
The Revenue Procedure also addresses changes for 2025 made by Public Law 119-21, known as the One Big Beautiful Bill Act.
For More Information
For more information, see the PAYO Compliance Update, IRS Announces 2026 COLAs for Transportation Fringes, FSA Deferrals, and More. Compliance updates are emailed to PayrollOrg members and are also available on the Compliance Updates webpage.
To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!
Jyme Mariani, Esq., is Director of Payroll Information Resources for PayrollOrg.
