ConnectYourCare Announces 2023 IRS Limits for FSA, Commuter Benefits, and Adoption Assistance

The IRS made an official announcement on 2023 contribution limits for health care flexible spending accounts (FSAs), commuter benefits, and adoption assistance. For the 2023 plan year, FSA and commuter benefit contribution limits increased by $20/month from 2022 while adoption assistance is increasing by $1,060.

The IRS uses the cost of living and inflation to determine limits, which is detailed in Revenue Procedure 2020-45.

Health Care FSA Contribution Limit

A health care FSA lets account holders use pre-tax dollars for medical expenses. Eligible expenses include deductibles, copays, dental, vision, prescriptions, and family members’ medical care, regardless of their health coverage. The 2023 FSA contribution limit will be $3,050, which is a $200 increase from 2022.

2023 Health Care FSA Contribution Limit

2022

$2,850

2023

$3,050

Increased FSA Rollover Limit

Health care FSA funds may generally be used to reimburse expenses incurred during the year, with any remaining balance forfeited. However, there is an exception that lets employees roll over unused health care FSA contributions to the next year—if the employer offers this option—without reducing the amount of contributions for the next year.

Earlier in 2022, the IRS announced that the maximum rollover limit for health care FSAs was increased from $570 to $610.

2023 Health Care FSA Rollover Limit

2022

$570

2023

$610

Learn more about health care FSAs.

Commuter Benefits Contribution Limit

Commuter benefits, also known as known as qualified transportation fringe benefits, allow users to set aside pre-tax dollars for work transportation costs, including fare cards, vouchers, and shared rides. The 2023 commuter benefit contribution limit will be $300, a $20 increase from 2022.

2023 Commuter Benefit Contribution Limit

2022

$280

2023

$300

Learn more about commuter benefits.

Adoption Assistance Limit

Adoption assistance gives employees tax relief when they are adopting a child. For 2023, the amount that can be excluded from an employee’s gross income for the adoption of a child is $15,090. This is $1,060 more than in 2022, when it was $14,890.

2023 Adoption assistance limit

2022

$14,890

2023

$15,950

Learn more about adoption assistance.

Heading into a New Year

As we head into 2023, there are many unknown health care variables, but on the positive side, overall benefits are still the same. For employees, they will continue to be able to use tax-free money to pay for eligible items and services while reducing their taxable income. Likewise, employers will continue to be able to attract and retain employees with valuable benefit packages, as well as save on payroll taxes. We’re all in it together, and we’re ready for whatever comes next.

Any questions on 2023 contribution limits?

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About the Author:
Carla Wardin lives in St Johns, Michigan, where she focuses her writing on the health and technology industries.

By |2022-10-27T10:43:15-04:00October 29th, 2020|Adoption Assistance, Commuter, FSAs, Legislation|
Disclaimer: ConnectYourCare does not provide tax or legal advice. This information is not intended and should not be taken as tax or legal advice. Any tax or legal information in this notice is merely a summary of ConnectYourCare’s understanding and interpretation of some of the current tax regulations and is not exhaustive. You should consult your tax advisor or legal counsel for advice and information concerning your particular situation before making any decisions.

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