Summary

Adds diapers to the list of eligible medical and dependent-care expenses that can be paid or reimbursed from tax-advantaged accounts (HSAs, Archer MSAs, FSAs, HRAs, dependent care accounts and certain limited-purpose accounts). Also bars States and localities from imposing retail sales or use taxes on diaper purchases. Account changes apply to amounts or expenses after December 31, 2024; the sales-tax prohibition’s effective date is not specified in the text.

Key Points

• Diapers are added as eligible expenses for HSAs, Archer MSAs, health FSAs, HRAs, dependent-care assistance, and certain limited-purpose accounts.
• Account and reimbursement changes apply to amounts or expenses after December 31, 2024, and applicable plan months beginning after that date.
• States and local governments are prohibited from charging retail sales or use tax on diaper purchases.
• Congressional findings state diapers are essential, many families face diaper need, and no federal/state programs specifically pay for diapers.
• Employers, plan administrators, and the IRS will need to update program rules and documentation to allow diaper reimbursements.
• This does not create a new federal entitlement or appropriation — it changes tax treatment and state sales-tax rules.
• State and local tax revenue from diaper sales could decline; compliance and administrative workload will shift to payers and tax agencies.
• The bill does not specify funding for implementation or compensate states for lost sales-tax revenue.

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