Is there a salary cap for FSA?
Asked by: Amari Upton | Last update: July 20, 2025Score: 4.9/5 (19 votes)
What is the FSA salary reduction limit?
The IRS has released Revenue Procedure 2024-40 confirming that for plan years beginning on or after January 1, 2025, the health FSA salary reduction contribution limit increases to $3,300. The adjustment for 2025 represents a $100 increase to the $3,200 health FSA salary reduction contribution limit for 2024.
What is the FSA limit for highly compensated employees?
If you are an HCE, your Dependent Care FSA deduction may not exceed $3,600 per family for a married couple filing jointly. For an HCE married person filing separately, the limit is $2,500.
Is FSA based on salary?
How much should I contribute to my FSA/HSA? The amount of money you contribute each year depends on many factors. These include your salary, how many dependents you have, and any known health issues within your family.
How much can my employer contribute to my FSA?
Employer Contributions to Health FSAs
For instance, if an employee does not contribute to a health FSA, an employer can still contribute up to $500, but beyond that, the employer can match employee contributions up to the $3,050 limit.
Is An FSA (Flex Spending Account) Really Worth It? - DzamaTalk Ep. 58
Does FSA have income limits?
Maximum Annual Dependent Care FSA Contribution Limits
If your tax filing status is Single, your annual limit is: $5,000 if your 2024 earnings were less than $155,000; however, your contributions may not be in excess of your earned income for the plan year. $3,600 if your 2024 earnings were $155,000 or more.
Is there a salary cap for dependent care in FSA?
The IRS defines employees who earned $155,000 or more in 2024 as “highly compensated,” and limits their 2025 DepCare FSA contributions to $2,500. The Dependent Care FSA is a use-it-or-lose-it plan, with a grace period for using the funds in your account.
Can FSA pay for gym membership?
Gym memberships. While some companies and private insurers may offer discounts on gym memberships, you generally can't use your FSA or HSA account to pay for gym or health club memberships. An exception to that rule would be if your doctor deems fitness medically necessary for your recovery or treatment.
How does FSA work for payroll?
An FSA is an employer-sponsored spending account that allows employees to set aside pretax earnings to pay for eligible health care or dependent care expenses. Pretax funds are deducted from each paycheck and automatically deposited into an FSA account.
What happens if I contribute too much to FSA?
What if I contribute too much to my FSA? In most years, the remaining contributions left in your FSA at the end of the year will be absorbed by your employer.
What salary is considered highly compensated employee?
Compensation test: An employee is an HCE if he or she was actually paid more than a set dollar limit ($160,000 for 2025, $155,000 for 2024, $150,000 for 2023) from the company in the preceding year.
Is an HSA or FSA better?
Bottom line: Both HSAs and FSAs provide financial benefits for managing health care expenses. HSAs offer more flexibility and long-term growth potential, making them a valuable tool for future financial planning. Learn about HSA options from Aetna.
Can highly compensated employees participate in FSA?
Notice for Highly Compensated Employees with a Dependent Day Care FSA. The Internal Revenue Code (IRC) allows pretax contributions to FSAs as long as the benefit does not favor highly compensated employees (HCEs).
What is the maximum salary reduction?
The contributions are typically pre-tax, which reduces taxable income upfront, while distributions are taxed in retirement. The salary reduction contribution limit for SIMPLE IRAs is $16,000 in 2024 (up from 15,500 in 2023), and for 401(k)s is $23,000 in 2024 (up from $22,500 in 2023).
What is the legal limit for FSA?
An employee who chooses to participate in an FSA can contribute up to $3,300 through payroll deductions during the 2025 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax.
Does FSA cover peloton membership?
You can't directly pay for membership costs with your HSA/FSA card, but if you receive a Letter of Medical Necessity (LMN) from Truemed or an applicable licensed medical professional and are eligible for reimbursement, you may be able to apply your HSA/FSA funds to the cost of a Peloton Membership while the LMN is ...
Can I use FSA for dental?
You can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse if you're married, and your dependents. You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.
What is the downside to dependent care FSA?
Drawbacks of Dependent Care FSA
If money is left over at the end of the year, it doesn't carry over to the next year. If your employer doesn't offer this account, there is no other way to get one. Your FSA can only pay for qualifying expenses, while you're working.
Is there an income limit for dependent FSA?
General Rule: $5,000 Dependent Care FSA Calendar Year Limit
Internal Revenue Code §129 sets the annual dependent care FSA contribution limit at $5,000 (or $2,500 for married individuals filing separately).
Can I pay my babysitter with dependent care FSA?
Yes! You can include expenses paid to a babysitter if the services are necessary for you and your spouse, if married, to work, look for work, or attend school full-time. However, your dependent care costs are not eligible if you did not find a job and have no earned income for the year.
What is the 12 month rule for HSA?
It means you must remain eligible for the HSA until December 31 of the following year. The only exceptions are death or disability. If you violate the testing period requirement, your ineligible contributions become taxable income.
What is the 401k limit for 2025?
The annual elective deferral limit for 401(k) plan employee contributions is increased to $23,500 in 2025. Employees age 50 or older may contribute up to an additional $7,500 for a total of $31,000.
Can you use HSA for dental?
Your HSA also covers expenses for standard dental cleanings and dental check-ups. One thing to keep in mind is that some of these procedures may have a co-payment, so it's important that you check with your dental insurance provider to find out exactly what you'll have to pay out of pocket.