Summary

Treats diapers as eligible expenses under a range of pre-tax health and dependent-care accounts so families can use HSAs, FSAs, HRAs, and dependent care accounts to pay for diapers, and bans state and local sales or use taxes on retail diaper purchases. Tax-account changes apply to expenses or amounts after Dec 31, 2024 (with limited-purpose rules applying to months after that date); the sales-tax ban takes effect on enactment.

• Diapers are designated eligible expenses for HSAs, Archer MSAs, FSAs, HRAs, and dependent-care accounts so families can pay or be reimbursed pre-tax.
• HSA/Archer MSA changes apply to amounts paid after Dec 31, 2024; FSA/HRA and dependent-care changes apply to expenses after Dec 31, 2024; limited-purpose rules apply to months after Dec 31, 2024.
• States and local governments are prohibited from imposing sales or use taxes on retail diaper purchases.
• No new federal spending is created; the bill changes tax treatment and state tax authority but does not appropriate funds.
• Low-income families and parents of young children are the main beneficiaries, reducing out-of-pocket diaper costs and improving affordability.
• Employers and benefit administrators must update plan documents, claims systems, and communications to implement reimbursements for diapers.
• The change may modestly reduce federal income tax revenue and will reduce state/local sales tax collections on diapers.
• Clarifies that limited-purpose FSAs/HRAs can reimburse diapers without losing HSA compatibility.
• Dependent-care FSAs are explicitly allowed to cover diaper expenses under the modified definitions.
• Administrative and software updates will be required across tax, payroll, and benefits systems to reflect the new rules.