2027 IRS Limits Are Out: Here’s What Payroll Should Handle First
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The 2027 IRS limits are out. In Rev. Proc. 2026-35, the IRS announced inflation adjustments covering almost 70 tax provisions. But you don’t need to tackle them all at once. Start with the benefit elections employees are making right now.
Health Accounts Take Priority
Open enrollment is underway at many companies, so health accounts are the most time-sensitive item on the list. For 2027, the health FSA employee contribution limit rises to $3,500, up $100. If the plan allows carryovers, employees can roll up to $700 in unused 2027 funds into the 2028 plan year.
HSA limits were announced earlier this year: $4,500 for self-only coverage and $9,000 for family coverage. Already updated your system? Make sure your 2027 payroll settings count both employee deductions and employer contributions toward the limit. Eligible employees age 55 or older can add $1,000 in catch-up contributions.
Next, Line Up Withholding Updates
Get your January withholding update on the calendar. The 2027 tax brackets and standard deduction are final, but the IRS hasn’t released the 2027 tables yet. Those will come in Publication 15-T.
Check Your Commuter Caps
The monthly tax-free limits rise to $350 for transit and commuter vanpool benefits combined, and $350 separately for qualified parking. That’s up $10 each. Employer-provided benefits above those limits generally count as taxable wages.
Other Employer Benefit Limits Rise
For employers that offer educational assistance, the annual exclusion rises to $5,400. The adoption assistance exclusion also increases to $18,250. And employers with a qualified small employer HRA (QSEHRA) can reimburse up to $6,700 a year for self-only coverage and $13,550 for family coverage.
Retirement plan limits were announced separately. See our related story on those limits.
2027 IRS Limits: Payroll Action Steps
- Before elections close, confirm that FSA and HSA enrollment materials match your plan limits and payroll settings.
- Ask your vendor when the final 2027 withholding update will be ready, and schedule a test before your first January payday.
- Review commuter deduction caps and coordinate educational assistance, adoption assistance and QSEHRA updates with your benefits administrator.
More info: Rev. Proc. 2026-35