IRS Announces 2026 COLAs for Transportation Fringes, FSA Deferrals, and More

The IRS released cost-of-living adjustments (COLAs) for 2026 reflecting any increases in the flexible spending arrangements (FSA) deferral limit and excludable transportation fringes, among other changes [Rev. Proc. 2025-32, 10-9-25]. The Revenue Procedure also addresses changes made for tax year 2025 by Public Law 119-21, known as the One Big Beautiful Bill Act (OBBBA).

Qualified transportation fringes

The amounts that may be excluded from gross income for employer-provided qualified transportation fringe benefits (transportation in a commuter highway vehicle and any transit pass) and qualified parking for 2026 increase to $340 ($325 in 2025).

Health FSAs

For plan years beginning in 2026, the dollar limitation under IRC §125(i) on 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).

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