2023 IRS Limits for FSA, Transit, Adoption Assistance

The IRS just published new benefit limits for 2023. You’ll be able to save even more on your taxes with these accounts next year because limits are increasing. You can read the legalese in IRS Revenue Procedure 2022-38, but I’ll summarize the changes here.

2023 FSA Contribution Limits

The 2023 annual FSA contribution limit increased from $2,850 to $3,050. That is the most the IRS will let you contribute, but your employer may choose a lower contribution limit. Be sure to check your plan details. 

If you have a health FSA, it can be used for a wide variety of out-of-pocket healthcare expenses. Some examples of qualifying purchases include co-pays and deductibles, dental and vision expenses, prescriptions and many over-the-counter medications, plus even more.

2023 FSA Carryover

Not everyone can spends all of their FSA funds during the calendar year and some employers offer a Carryover option. In 2023, the most you can carry over will be $610, although your employer may choose a lower carryover limit. For 2022 the max was $570.

Plans that don’t have Carryover may offer a grace period, which is additional time to spend down your account balance after the plan year ends. Check your plan to see if either of these options is available to you.

2023 Qualified Transit Benefits

The IRS also set the 2023 monthly limits for qualified transportation benefits. These will increase to $300 per month for Parking and $300 per month for Transit.  Both were $280 in 2022.

Qualified transportation benefit accounts cover expenses ranging from transit passes to commuter vehicle fares, and parking fees associated with traveling to and from a person’s place of work.

2023 Qualified Adoption Assistance Benefits

Some employers offer a qualified adoption assistance plan to help employees with the costs of adopting a child. Assistance under these plans (up to the annual limit) is not taxable to the employee as income. For 2023, the limit is $15,950, up from $14,890 in 2022.