The Internal Revenue Service (IRS) has released the 2025 cost-of-living adjustments (COLAs) for a wide variety of tax-related limits, including limits relating to employer-sponsored benefits that may include the following:
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Health flexible spending cafeteria plans: For 2025, the dollar limit on employee pre-tax contributions to health flexible spending accounts (FSAs) will be $3,300 (up from $3,200). If the plan permits carryovers, the maximum amount that can be carried over to the 2026 plan year is $660 (up $20 from 2024).
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Qualified small employer health reimbursement arrangement (QSEHRA): For 2025, the maximum amount of payments and reimbursements under a QSEHRA will be $6,350 for self-only coverage and $12,800 for family coverage (up $200/$350 from 2024).
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Qualified transportation fringe benefit: For 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking rises to $325, increasing $10 from 2024.
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Adoption assistance exclusion and adoption credit: For 2025, the maximum amount that may be excluded from an employee's gross income under an employer-provided adoption assistance program for the adoption of a child will be $17,280 (up $470 from 2024).
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Small business health care tax credit: For 2025, the average annual wage level at which the tax credit begins to phase out for eligible small employers will be $33,300 (up $900 from 2024). The maximum average annual wages to qualify for the credit as an eligible small employer for 2025 will be $66,600.
Dependent care assistance program (DCAP) limits remain unchanged. There have been some adjustments made for the employer-shared responsibility penalties in 2025 that show a decrease in the penalty for failure to file under 4980H(a) and 4980H(b).
This information is a tool for employers to provide to their employees if applicable, but it is not intended to be tax guidance, nor should you provide tax guidance to your employees. For more detail on any impact on you as an employer related to any inflation adjustments, please consult your tax advisor.
For a complete listing of the more than 60 inflation adjustments to be made and the impact on all taxpayers when filing in 2026, see Revenue Procedure 2024-40 PDF.
Jana Karr is a human resources consultant for Employers Council.