Sponsors (12)
The bill lets families use HSA funds tax‑free for funeral costs and clarifies qualifying items to reduce uncertainty, but at the risk that vulnerable HSA holders may deplete funds needed for future medical care and with a small fiscal cost.
Families or other people who pay for a beneficiary's funeral can use HSA funds tax‑free for up to $5,000, reducing immediate out‑of‑pocket funeral costs for households that hold HSAs.
People who pay funeral expenses within 90 days after a beneficiary's death can treat those expenses as incurred before death for HSA purposes, making it easier to access HSA funds in a timely way after a death.
The law clarifies which funeral expenses (burial, cremation, casket, hearse, embalming, clothing) qualify, reducing uncertainty for taxpayers, HSA administrators, and the IRS about allowable claims.
People who rely on HSAs for future medical care — including seniors, retirees, chronically ill patients, and low‑income HSA holders — may deplete limited HSA balances on funeral costs, risking reduced access to care or higher out‑of‑pocket medical spending later.
Allowing tax‑free HSA distributions for funerals will modestly reduce federal tax receipts, creating a small budgetary cost that could require offsets elsewhere.
Based on analysis of 2 sections of legislative text.
Allows HSA funds to pay up to $5,000 in funeral expenses per beneficiary as qualified medical distributions, with a 90‑day post-death timing rule.
Official title: To amend the Internal Revenue Code of 1986 to treat distributions from health savings accounts for funeral expenses of the account beneficiary as qualified distributions.
Introduced March 27, 2025 by Kevin Hern · Last progress March 27, 2025
Allows money from health savings accounts (HSAs) to be used to pay up to $5,000 in funeral expenses for the account beneficiary and treat those payments as qualified medical distributions for tax purposes. Funeral expenses paid within 90 days after the beneficiary’s death are treated as if incurred immediately before death; the change applies to amounts paid after enactment in taxable years ending after enactment.