The IRS has released FSA and HSA limits for 2023.
A flexible spending account (FSA) allows you to deduct a set amount of pre-tax money from each paycheck to pay for certain IRS-qualified out-of-pocket health expenses, such as medical copays, dependent care, prescription drugs, transit, and parking. Aside from the annually allowed rollover amount ($610 in 2023), any remaining amount in this fund after the plan year and grace period ends will be forfeited.
A health savings account (HSA), when paired with a high-deductible health plan (HDHP), similarly allows you to deduct pre-tax money to pay for those same IRS-qualified out-of-pocket health expenses.
While similar to one another, there are key differences between the FSA and HSA:
- An HSA is not subject to the “use it or lose it” rule.
- You may carry over your HSA balance from one year to the next.
- The HSA must be used with an HDHP.
- If you leave employment, the HSA still belongs to you.
The IRS governs how much you can deduct for your tax-deferred savings accounts. Here are the annual limits for each plan. You may also consult IRS Publication 969. Visit the linked helpful resources to learn more about each account.
2023 FSA and HSA Limits
2023 | 2022 | |
|---|---|---|
| FSA for health care expenses | $3,050 | $2,850 |
| FSA maximum rollover | $610 | $570 |
| HSA – individual | $3,850 | $3,650 |
| HSA – family | $7,750 | $7,300 |
| HSA – catch-up for health expenses, ages 55+ | $1,000 | $1,000 |
| LPFSA for dental and vision expenses | $3,050 | $2,850 |
| DCA for dependent care | $5,000 | $5,000 |
| Parking FSA for work-related parking | $300 | $280 |
| Transit FSA for public transportation | $300 | $280 |
Open enrollment for Nextep client FSA and HSA accounts will occur during November for a January 1, 2023 effective date.
We’re here to help! Contact Nextep for more information.
