As inflation pushes costs higher, employees are looking to their employers for help. But across-the-board raises aren't always on the table.  

In this environment, benefits leaders are under pressure to get creative and help employees spend smarter and save more.  

The good news? Many of the most common consumer-directed benefits already deliver amazing tax savings. Potentially thousands of dollars in savings each year. 

Below we explore how much employees could save if they maximize their benefits. To keep it simple, we’ll use 20% as the example tax rate to derive potential savings. Let’s dive in. 

HSA | Health Savings Account 

HSAs let employees set aside money to pay for future healthcare costs. Not only can members spend their HSA tax-free on qualified medical expenses, but they can also invest their money and any potential tax growth is also tax free.¹ The 2025 family plan HSA contribution limit is a whopping $8,550, up $250 from the prior year.  

Not paying 20% taxes on $8,550 means employees could see $1,710 more dollars in their pocket at the end of the year.  

LPFSA | Limited Purpose Flexible Spending Account  

LPFSAs let employees complement their HSA with an account specifically designed to help pay for dental and vision expenses.² For 2025, the LPFSA contribution limit is $3,300.  

Not paying 20% in taxes on $3,300 means employees could see $660 more dollars in their pocket at the end of the year.³

DCFSA | Dependent Care Flexible Spending Account 

DCFSAs are a great way to support employees with the rising costs of childcare. According to a 2022 study, the cost of childcare has risen 41% since the start of the pandemic. According to the same study, childcare costs in some lower-income households cost twice as much as their mortgage. 

For 2025, the DCFSA contribution limit is $5,000. Not paying 20% in taxes on $5,000 means employees could see $1,000 more dollars in their pocket at the end of the year. 

Commuter Benefits  

Commuter benefits let employees save on taxes for both parking and transit expenses.

For 2025, the IRS will let employees use their commuter benefits to spend $325 a month tax free for eligible parking expenses and $325 a month tax free for eligible transit expenses. That’s $650 a month—and $7,800 for the year.

Not paying 20% in taxes on $7,800 means employees could see $1,560 more dollars in their pocket at the end of the year.

Taken altogether, employees with a family health plan could contribute up to $24,650 to their HSA, LPFSA, DCFSA, and commuter benefits. That’s more than the 2025 IRS contribution limit for 401(k)s. And that means potentially even more tax savings than employees get who max out their pre-tax retirement.

HSA

LPFSA

DCFSA

Commuter

It’s a lot! And even if employees only contribute a quarter of this, they could still see $1,000+ tax savings each year.  

But getting employees to take full advantage of their benefits is not easy. It requires sustained, targeted employee education to boost benefits understanding. 

As you consider potential benefits partners, prioritize employee education and engagement. It can make a significant difference when it comes to maximizing benefits utilization—and employee satisfaction.  

¹HSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize HSA funds as tax-deductible with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.

²It is the members’ responsibility to ensure eligibility requirements as well as if they are eligible for the expenses submitted.

³FSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize FSA funds as tax deductible with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.

HealthEquity does not provide legal, tax or financial advice. 

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