QSEHRA contribution limits for 2026

The 2026 caps

A QSEHRA is defined by its ceiling. Unlike an ICHRA, which has no contribution limit, the IRS caps how much a small employer can reimburse through a QSEHRA each year, and adjusts the figure for inflation. For tax years beginning in 2026, the maximums are $6,450 for an employee with self-only coverage — about $537.50 a month — and $13,100 for an employee with family coverage, roughly $1,091.66 a month. Those figures come from IRS Revenue Procedure 2025-32, released in October 2025, and they rose modestly from the 2025 caps of $6,350 and $12,800.

Self-only versus family

The cap that applies to a given employee depends on whether their coverage includes family members. An employee covering only themselves is held to the self-only maximum; an employee covering a spouse or children can be reimbursed up to the higher family maximum. You don’t have to offer the full amount — the IRS sets a ceiling, not a floor — but you can never reimburse above the cap that applies to that person’s coverage. Many small employers set their allowance well below the maximum; recent administrator data put the average closer to $440 a month.

Proration for mid-year eligibility

If an employee becomes eligible partway through the year — a new hire, say — you prorate the annual cap for the months they’re eligible. An employee eligible for eight months of 2026 with self-only coverage could be reimbursed up to roughly $4,300 for the year, which is eight-twelfths of $6,450. The same logic applies to a non-calendar plan year: prorate the limit to the portion of the year the plan covers. Getting proration right matters, because it keeps the benefit inside the cap that preserves its tax-free status.

What happens if you go over

Staying within the cap is what makes the reimbursements tax-free. If you reimburse an employee more than their applicable limit, the amount over the cap becomes taxable wages to the employee, reportable on Form W-2, and can carry payroll-tax consequences for the business. The fix is simple in principle: size the allowance at or below the cap, and if you use an administrator, let their system enforce the ceiling automatically. The most common mistake is setting one flat allowance for everyone that quietly exceeds the self-only cap while trying to be generous to families.

Why there is a cap at all

The ceiling is the whole trade-off of a QSEHRA. Congress designed it as a simple, capped benefit for the smallest employers — predictable and easy to run, but limited in how generous it can be. In a low-cost area, the cap may comfortably cover a solid individual plan; in a high-cost market, it may fall short of a comprehensive one, and your employees would cover the difference. If the cap is the binding constraint — if you want to give more, or vary the amount across different groups of workers — the uncapped ICHRA is the equivalent arrangement without the ceiling.

How the limits move each year

The IRS recalculates the caps annually using a cost-of-living adjustment and rounds to the nearest $50. Since the 2017 tax law, the adjustment uses the chained Consumer Price Index, which tends to produce smaller year-over-year increases than the older method — so the caps creep up slowly, and in a low-inflation year they can stay flat. From 2020 to 2026 the limits rose roughly 23%. The practical takeaway: check the current year’s figure before each plan year, and update your allowance and plan documents to match. This is general information about how the limits work, not tax, legal, or benefits advice.