Sponsors (27)
The bill broadens and clarifies tax-advantaged uses of HSAs, FSAs/HRAs, and Archer MSAs—helping more families (including care for parents and persons with chronic conditions) pay with pre-tax dollars—while imposing transitional uncertainty, administrative costs, and modest federal revenue loss.
Many taxpayers — including people with chronic conditions — would be able to contribute more to Health Savings Accounts (or face clearer monthly limit rules), increasing tax-preferred medical savings and flexibility.
Employees could use FSAs/HRAs to pay medical expenses for parents and parents‑in‑law tax‑free for expenses after Dec 31, 2024, lowering employees' taxable income and out‑of‑pocket costs for family care.
The bill adopts a clarified definition of 'medical care' for plan administration (by adopting §213(d) with a specific exclusion), reducing ambiguity for plan administrators and taxpayers about eligible FSA/HRA uses.
New or expanded tax-preferred uses across HSAs, FSAs/HRAs, and Archer MSAs could modestly reduce federal income tax revenue, with budgetary effects borne by all taxpayers or through changes in services/programs.
Unclear or newly inserted statutory language will likely require IRS/Treasury guidance and create uncertainty for taxpayers, payors, and plan administrators (complicating 2025 tax filings and plan operation until guidance is issued).
Employers and plan administrators will incur administrative and implementation costs to update plan documents, systems, and communications to accommodate expanded parent coverage and other changes.
Based on analysis of 4 sections of legislative text.
Allows HSAs/FSAs/HRAs/MSAs to cover qualifying medical expenses for a taxpayer's parent (and spouse's parent) by amending related IRC provisions, effective for expenses after Dec 31, 2024.
Official title: To amend the Internal Revenue Code of 1986 to allow expenses for parents to be taken into account as medical expenses, and for other purposes.
Introduced January 3, 2025 by Vernon G. Buchanan · Last progress January 3, 2025
Expands tax-advantaged treatment of health accounts so taxpayers can use HSAs, FSAs, HRAs, and Archer MSAs to pay for certain medical care for a parent (including a spouse's parent). It amends parts of the Internal Revenue Code to insert new language into HSA, FSA/HRA, and Archer MSA rules and makes the changes effective for amounts paid or incurred after December 31, 2024. The changes explicitly preserve the tax-preferred status of FSA and HRA distributions used for a parent’s medical care and modify the statutory text for HSA and Archer MSA rules; the bill text inserts new statutory language but the exact inserted wording is not provided in the summary text available.