IRS Increases FSA Employee Contribution Limit to $3,300 for the Year 2025
These accounts are not subject to federal income or social security taxes.
Employees planning to open a health care flexible spending arrangement (FSA) account can contribute $100 more for the 2025 plan year, according to the U.S. Internal Revenue Service (IRS).
An FSA is a type of savings account that employees use to pay for certain medical expenses such as copayments, dental care, menstrual products, prescription medications, and over-the-counter drugs not covered by existing health plans. Contributions to an FSA account are deducted from the taxpayer’s wages. In 2024, people can contribute up to $3,200 through payroll deductions towards their FSA account.
For 2025, this amount has been bumped to $3,300, said a Nov. 7 statement from the department.
“If the plan allows, the employer may also contribute to an employee’s FSA,” the agency said. “If the employee’s spouse has a plan through their employer, the spouse can also contribute up to $3,300 to that plan. In this situation, the couple could jointly contribute up to $6,600 for their household.”
In case the individual does not utilize the full amount in the FSA account for a specific year, only a small portion will be allowed to carry forward. The maximum carryover allowed for 2025 is $660, up from $640 this year.
A key benefit of an FSA is that amounts contributed to the account are not subject to federal income tax, social security tax, or Medicare tax.
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The IRS advises employees to plan out their health care activities to effectively calculate how much to contribute to FSAs. Such plans should take into account big-ticket expenses, seasonal needs such as allergy products or sunscreen, over-the-counter items eligible for FSA, and routine checkups or visits with specialists not covered under regular insurance plans.
Not all employers offer FSAs because it’s not a requirement. Employees can enroll in an FSA account through the government’s Flexible Spending Accounts program Open Season, which usually runs during November and December every year. For 2024, the Open Season is scheduled between Nov. 11 and Dec. 9.
The FSA revision comes after the IRS updated contribution limits for other retirement accounts.
For 401(k) plans, the limit has been raised to $23,500 in 2025, up by $500 from this year. The same limit applies to 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan.
The threshold for annual contributions to Individual Retirement Accounts were kept the same at $7,000.
The IRS also raised income tax slab thresholds for the 2025 tax year.
The highest 37 percent tax rate now applies to people making more than $626,350 annually, up from $609,350 in tax year 2024. The lowest 10 percent rate now applies to taxpayers making $11,925 or less, up from $11600.
Standard deductions have been bumped up by $400 to $15,000 for individual taxpayers, and by $800 to $30,000 for married couples filing jointly.
