Businesses may report income from employee flexible spending accounts (FSAs) in a few ways, or not at all, on a W2 form. The Internal Revenue Service does not require employers to report health flexible spending accounts on an employee’s W2 form. There is an exception to the rule.
In 2025, the Internal Revenue Service announced an increase to the amount that could be contributed to a:
- Health Care Flexible Spending Account (HCFSA)
- Limited Expense Health Care FSA (LEX HCFSA)
The 2025 benefit period allowed for a contribution of up to $3,300, which was an increase of $100 from the benefit period in the previous year. The minimum annual election for each FSA stayed at $100.
Report income from a health FSA if the amount elected for a health FSA is greater than your employee’s deductions for all benefits. Employers must also report all dependent care FSAs. Enter that information in Box 10, labeled “Dependent Care Benefits.”
Do not report employee salary reductions that an employee contributes to an account. The Internal Revenue Service does not consider that income as part of an employee’s taxable wages. Only include the amount in Box 14 “Other” on a Form W2 for informational purposes.
People Also Ask
- Are employees required to report FSA contributions on their own tax return? – No, the FSA contributions are handled entirely through payroll, which means that an employee does not report it on their personal tax returns.
- Do employers need to report FSA contributions for employees who terminated their contract mid-year? – Yes, the standard W2 reporting rules still apply to contributions made prior to the employee’s termination date. Getting comprehensive tax software helps streamline the entire process.
- Are employee FSA reimbursements taxable? – No, the reimbursements are excluded from taxable income.
Make tax rules and reporting less overwhelming with a trustworthy accounting suite of tools and our W2/1099 Forms Filer base software. Download our free 1099-etc Demo software today and explore the fully functional system, with only a few small exceptions.