IRS Announces 2027 COLAs for Transportation Fringes, FSA Deferrals

The IRS released cost-of-living-adjustments (COLAs) for 2027 reflecting any increases in excludable transportation fringes and the flexible spending arrangement (FSA) deferral limit, among other changes [Rev. Proc. 2026-35, 11-5-26].

For 2027, the amounts that may be excluded from gross income for employer-provided qualified transportation fringe benefits and qualified parking increase to $350 per month ($340 in 2026).

For plan years beginning in 2027, the dollar limitation for voluntary employee salary reductions for contributions to health FSAs increases to $3,500 ($3,400 in 2026). For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount increases to $700 ($680 in 2026).

The Revenue Procedure also addresses changes made by Public Law 119-21, known as the One Big Beautiful Bill Act.

For More Information

Complete coverage of the announced changes is available in Payroll Currently (Issue 11, Vol. 34, 11-6-26).

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!

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