Lowering Costs for Caregivers Act of 2025

Summary

Allows certain tax-advantaged health accounts to be used to pay for medical care of a taxpayer's parent or the taxpayer's spouse's parent without causing the account to lose tax-favored status. The bill makes parallel changes to the tax rules for health savings accounts (HSAs), health flexible spending arrangements (FSAs), health reimbursement arrangements (HRAs), and Archer MSAs, with the changes applying to amounts paid or expenses incurred after December 31, 2025. Note: two of the amendatory instructions reference inserted text that is not provided in the section summaries.

• Permits use of FSA and HRA funds to pay for a taxpayer's parent or the spouse's parent without making the amounts taxable to the taxpayer.
• Instructs amendments to HSA and Archer MSA provisions in the Internal Revenue Code, effective after Dec 31, 2025 (specific insertion text not provided in summaries).
• Applies prospectively to amounts paid or expenses incurred after December 31, 2025.
• Relies on the tax code definition of "medical care" (section 213(d)) while instructing to ignore paragraph (1)(D) of that definition for these rules.
• Requires plan sponsors and account administrators to update plan documents and likely adjust administrative procedures and recordkeeping.
• Expands tax-favored treatment to include caregiving expenses for parents of taxpayers or their spouses, potentially lowering out-of-pocket costs for caregivers.
• Does not specify documentation or verification requirements; IRS guidance or plan-level rules will be needed for implementation.
• No explicit appropriations or emergency spending; primary effect is a change to tax law and plan administration.