2027 Health FSA Limit: $3,500, Carryover $700 (IRS Official)

The short answer. The confirmed 2026 health flexible spending arrangement (FSA) salary-reduction limit is $3,400, set by the IRS in Revenue Procedure 2025-32. Because the cap is indexed to inflation and rounded down to the nearest $50, it moves in clean $50 steps, which means the 2027 limit is $3,500, with a $700 carryover maximum. The IRS made both official on November 5, 2026, in Revenue Procedure 2026-35, section 3.16 (news release IR-2026-133); our eleven-month projection was exact. For open-enrollment elections, $3,500 is the number.

Update, November 8, 2026: The IRS confirmed the 2027 health FSA limit at $3,500 and the carryover maximum at $700 in Revenue Procedure 2026-35, section 3.16, released November 5, 2026. Our projection, built from the chained CPI data through August 2026, was exact. The IRS averaged the eleven published months of the window and left the missing October 2025 index out, which is the choice that produced our $3,516 unrounded figure.

Update, September 13, 2026: The August 2026 chained CPI, published September 11, closed the twelve-month window at an average of 182.856; the unrounded 2027 figure is $3,516, so the $3,500 cap and $700 carryover were arithmetic awaiting the IRS revenue procedure rather than a projection, and the IRS 2027 inflation adjustments tracker marks them decided.

Update, September 6, 2026: With C-CPI-U data now published through July 2026, the indexed 2027 health FSA limit works out to $3,515 before rounding, which rounds down to the nearest $50 to $3,500 — not the middle of a range, but the figure the math pointed to at the time. The carryover maximum, set at 20% of the salary-reduction limit, follows to $700. Only a genuinely sharp move in the August C-CPI-U reading — a drop of roughly 4.7% in a single month — would pull the unrounded figure back under $3,500 and change the outcome. The August number publishes September 11, alongside every other indexed 2027 figure tracked on our IRS 2027 inflation adjustments tracker.

What the 2026 limit actually is

A health flexible spending arrangement, almost always shortened to FSA, lets an employee set aside pre-tax salary to pay for qualified medical expenses such as copays, prescriptions, and out-of-pocket care. The amount you can route into that account each year is the salary-reduction limit, and for 2026 the IRS has fixed it at $3,400. That figure is confirmed, published in Revenue Procedure 2025-32, and it represents a $100 increase over the $3,300 cap that applied in 2025.

There is a second number worth keeping in view. If your employer’s plan allows a carryover of unused funds into the following year, the maximum 2026 carryover is $680. That carryover is the narrow exception to an FSA’s defining feature, which is that it is mostly use-it-or-lose-it. Money you set aside and do not spend, beyond the permitted carryover, generally disappears at year-end, so the contribution decision is one you want to size carefully rather than max out reflexively.

How the cap is indexed and rounded

The reason the FSA limit behaves so predictably comes straight from the statute. The salary-reduction limit is set under Internal Revenue Code section 125(i) and adjusted for inflation each year. The inflation measure is not the headline consumer price index you see in the news but the chained Consumer Price Index for All Urban Consumers (C-CPI-U), a version that accounts for how people substitute between goods as prices change and that the IRS uses across many of its annual adjustments.

The second half of the mechanism is the rounding. After the inflation adjustment is applied, the result is rounded down to the nearest $50. That single rule explains almost everything about how this number behaves: it is why the cap never lands on an odd figure like $3,427, why it moves in tidy $50 steps, and why it tends to rise by $50 or $100 in a given year rather than by some irregular amount. The carryover maximum follows from the same arithmetic, set at 20% of the salary-reduction limit, which is how the 2026 carryover arrives at $680 against a $3,400 base.

From a range to one number

Once you understand the $50-step mechanism, the 2027 figure follows naturally. Starting from the $2,500 base written into section 125(i) and applying the C-CPI-U indexing accumulated since 2012, the 2027 health FSA limit works out to $3,500 — our unrounded figure came to $3,516, which rounds down to the nearest $50. It would have taken a roughly 4.7% single-month drop in the August C-CPI-U reading to pull the unrounded number back under $3,500, and the August print, published September 11, did not do that.

Presenting the pre-July math as a range was the honest treatment before the data existed to narrow it, and the shape of the outcome is still the useful takeaway: the increase is two $50 steps ($100) above the 2026 cap, not a dramatic jump and not a cut. For anyone planning open enrollment, that narrowness is the information that matters, because it tells you the 2027 ceiling sits just slightly above where 2026 sits.

The official number arrived on the usual fall calendar. The IRS confirmed the 2027 health FSA limit of $3,500 and the $700 carryover maximum in Revenue Procedure 2026-35, section 3.16, released November 5, 2026. Our eleven-month projection was exact.

Planning around the limit

The practical reason to track this number closely is that an FSA’s mostly use-it-or-lose-it design rewards a contribution figure that matches your expected spending rather than the maximum the law allows. Electing the full cap makes sense if you can confidently forecast that much in qualified expenses; otherwise you are exposing dollars to forfeiture beyond the carryover. Knowing that the 2027 ceiling rises only modestly, by two $50 steps ($100), helps you plan that election.

The same fall enrollment form usually carries the commuter benefit election, whose 2027 cap is set by the same August-ending index and is now official at $350 a month for transit and for parking (the 2027 commuter limit). The dependent care FSA on the same form works differently: its $7,500 cap comes from section 129, which has no inflation clause, so it does not move in 2027 (dependent care FSA limit 2027).

It also helps to place the FSA limit in context against the other tax-advantaged health account most people encounter. The FSA cap is separate from, and much lower than, the health savings account (HSA) limit, and the two accounts differ in a way that matters for planning: an FSA is the employer’s account and is mostly use-it-or-lose-it apart from the limited carryover, whereas an HSA is yours to keep and roll forward indefinitely. That contrast is the heart of the decision, and it is worth reading through the full comparison of how the FSA compares with an HSA before you lock in an election. Because eligibility for an HSA depends on the kind of plan you carry, it is also worth understanding the health-plan choice around these accounts, since the type of coverage you select determines which of these accounts is even available to you.

One quirk of the IRS calendar is worth knowing: the 2027 limits did not all arrive at once. The 2027 HSA limits were official first — the IRS publishes those in May, about seven months before the year begins — and the FSA cap here followed in the November 5 revenue procedure, while the 2027 401(k) and IRA limits come from a separate IRS notice. If you are mapping out all of next year’s ceilings at once, those companion pages carry the same math-first treatment as this one.

None of this changes the bottom line on the headline question. The 2026 health FSA limit is a confirmed $3,400, and the indexing-and-rounding machinery put the 2027 figure at $3,500, which the IRS then confirmed in November 2026. The math did the heavy lifting.

Sources

• Legal Information Institute, Cornell Law School — 26 U.S.C. 125, cafeteria plans and the section 125(i) health FSA limit and its inflation indexing
• Internal Revenue Service — Revenue Procedure 2026-35, section 3.16, 2027 inflation-adjusted health FSA limit and carryover
• Internal Revenue Service — news release IR-2026-133, November 5, 2026
• Internal Revenue Service — Revenue Procedure 2025-32, 2026 inflation-adjusted health FSA limit and carryover
• Internal Revenue Service — Publication 969, health savings accounts and other tax-favored health plans, including FSAs