Sponsors (32)
The bill expands and clarifies tax‑favored options for paying medical expenses (helping families, chronic patients, and savers) at the cost of modest federal revenue losses and increased short‑term compliance and administrative burdens that will require IRS guidance.
Employees, parents, and families can pay more medical expenses tax‑free (including parent/in‑law expenses starting 2025) and gain clearer tax treatment across HSAs, FSAs/HRAs, and Archer MSAs, increasing usable tax‑preferred savings for health care.
Employees who use FSAs/HRAs can lower their taxable income by using pre‑tax funds for a wider set of family medical expenses, reducing out‑of‑pocket after‑tax costs.
People with chronic health conditions could be allowed greater HSA contributions (or clearer monthly limitation rules), enabling larger tax‑preferred savings for ongoing care.
Taxpayers broadly could face uncertainty and transitional burdens because unspecified statutory insertions will require IRS/ Treasury guidance, leaving taxpayers and payors unsure how to apply rules for 2025 contributions until guidance is issued.
Expanding tax‑free uses and contribution rules (HSAs, FSAs/HRAs, Archer MSAs) could modestly reduce federal income tax revenue, potentially affecting federal budgets unless offsets are provided.
Some taxpayers might lose access to prior HSA tax advantages or face added compliance costs if qualifying rules are narrowed or made more complex by the changes.
Based on analysis of 4 sections of legislative text.
Allows HSAs, FSAs, HRAs, and Archer MSAs to reimburse medical care for a taxpayer’s parent (or spouse’s parent) tax-free, effective for amounts 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-favored treatment of consumer-directed health accounts so money in HSAs, FSAs, HRAs, and Archer MSAs can be used to pay for medical care for a taxpayer’s parent (or a taxpayer’s spouse’s parent) without losing tax-preferred status. The bill amends multiple Internal Revenue Code sections to add new eligibility/definition language and clarifies that eligible medical care for these purposes ignores a specific subparagraph of section 213(d). The changes apply to expenses or amounts paid after December 31, 2024. The effect is to broaden who counts as an eligible dependent for account reimbursements, making it easier for caregivers to use pre-tax dollars to pay for parent care costs under HSAs, FSAs/HRAs, and Archer MSAs.