IRS Announces 2025 COLAs for Transportation Fringes, FSA Deferrals

The IRS released cost-of-living-adjustments (COLAs) for 2025 reflecting any increases in excludable transportation fringes and the flexible spending arrangement (FSA) deferral limit, among other changes [Rev. Proc. 2024-40, 10-22-24].

2025 COLAs for Transportation Fringes, FSA Deferrals

For 2025, the amounts that may be excluded from gross income for employer-provided qualified transportation fringe benefits and qualified parking increase to $325 per month ($315 in 2024).

For plan years beginning in 2025, the dollar limitation for voluntary employee salary reductions for contributions to health FSAs increases to $3,300 ($3,200 in 2024). For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount increases to $660 ($640 in 2024).

Complete coverage of the announced changes will be in Payroll Currently (Issue 11, Vol. 32, 11-1-24).

For More Information

For more information, see the PAYO Compliance Update, IRS Announces 2025 COLAs for Transportation Fringes, FSA Deferrals, and More. Compliance updates are emailed to PayrollOrg members and are also available on the Compliance Updates webpage.

Rayna Alexander, Esq., is Editor of Payroll Information Resources for PayrollOrg.