What's New for 2026
Major policy shifts and updated limits for fringe benefit compliance. This is the biggest year for changes since the Tax Cuts and Jobs Act.
Based on IRS Publication 15-B (For use in 2026), P.L. 119-21, and Revenue Procedure 2025-11
Major Policy Changes
Four significant policy shifts take effect for tax years beginning after 2025.
Student Loan Repayment Now Permanent
§127P.L. 119-21 permanently extends the $5,250 exclusion for employer-provided educational assistance that covers student loan repayments. No more sunset dates or annual extensions. Employers can now offer this as a long-term recruiting and retention benefit with full confidence. The $5,250 cap covers tuition and loan repayments combined in any tax year.
Bicycle Commuting Benefit Permanently Eliminated
§132(f)The TCJA suspended the qualified bicycle commuting exclusion from 2018 through 2025. P.L. 119-21 now permanently eliminates it rather than allowing it to revert. Employers can no longer provide tax-free reimbursements for bicycle commuting expenses. Note: some states (e.g., Massachusetts) do not conform and still allow a state-level exclusion.
Employer Meal Deduction Eliminated
§274(n)For amounts incurred or paid after 2025, employers can no longer deduct expenses for meals provided through an eating facility, even if they meet the de minimis fringe or convenience-of-employer tests. The meals themselves can still be excluded from employee income if they qualify, but the employer gets no tax deduction. This changes the cost calculus for on-site cafeterias and meal programs.
AI Literacy as a Working Condition Benefit
§132(d)Employer-provided AI literacy and skill development programs may qualify as tax-free working condition fringe benefits if they maintain or improve skills required for the employee's current job. This is new IRS guidance per Executive Order 14179.
Updated Limits
Exclusion limits that changed for tax year 2026 compared to 2025.
| Benefit | 2025 | 2026 |
|---|---|---|
Dependent Care Assistance+50% §129 The largest single limit increase in decades. Frozen at $5,000 since 1986, now jumping 50% under P.L. 119-21. Employers offering DCAP programs should update plan documents and communicate the new cap to employees immediately. | $5,000 / $2,500 MFS | $7,500 / $3,750 MFS |
Qualified Transportation & Parking §132(f) Both the transit pass exclusion and qualified parking exclusion increased. Update monthly payroll caps for commuter benefit programs. | $325/month | $340/month |
HSA Employer Contributions §223 Self-only and family limits both increased. Catch-up contribution for age 55+ remains $1,000. Requires enrollment in an HDHP. | $4,300 / $8,550 | $4,400 / $8,750 |
Health FSA Salary Reduction §125 The maximum an employee can elect to contribute pre-tax to a health flexible spending arrangement increased by $100. | $3,300 | $3,400 |
FSA Carryover Maximum §125 If your cafeteria plan allows carryover of unused health FSA balances, the new ceiling is $680. | $660 | $680 |
Adoption Assistance §137 The modified AGI phaseout range also shifted: begins at $265,080 (was $259,190), complete phaseout at $305,080 (was $299,190). | $17,280 | $17,670 |
Long-Term Care Per Diem Qualified LTC Applies to periodic payments received under qualified long-term care insurance contracts. Amounts above this limit are generally taxable unless actual care costs exceed the per diem. | $420/day | $430/day |
Unchanged for 2026
These limits remain the same as 2025.
Statutory, not inflation-adjusted. Coverage above $50K creates taxable imputed income. Use the IRS Uniform Premium Table to calculate.
The total exclusion cap for educational assistance remains $5,250 per year, covering both tuition and student loan repayments combined.
Qualified discount limits remain tied to gross profit percentage for property and 20% of price for services.
$1,600 for qualified plan awards, $400 for nonqualified. Unchanged.
Still case-by-case based on frequency and value. Note: the employer meal deduction change above does NOT eliminate the employee-side de minimis exclusion for meals.
Sources: IRS Publication 15-B (2026), Pub 15-B PDF, P.L. 119-21