Sponsors (12)
The bill lets families use HSA funds more readily and clearly for funeral costs (up to $5,000 and within 90 days), easing near-term financial burdens but risking depletion of savings needed for future medical care and causing modest revenue loss.
Families and other payers can use HSA funds tax-free for up to $5,000 in funeral expenses, reducing immediate out-of-pocket costs for bereaved households.
Funeral expenses paid within 90 days after death may be treated as incurred before death, allowing timely access to HSA funds to cover funeral costs without administrative delay.
The bill clarifies which funeral items (burial, cremation, casket, hearse, embalming, clothing) qualify, reducing IRS uncertainty and easing claims and administration for beneficiaries and administrators.
People who use HSA funds for funeral costs — particularly low-income individuals, seniors, and those with chronic conditions — may deplete balances needed for future medical care, increasing the risk of unmet health needs and higher medical expenses later.
Treating funeral costs as tax-free HSA distributions will modestly reduce federal tax revenue, potentially creating small budgetary pressures or the need for offsets.
Based on analysis of 2 sections of legislative text.
Allows up to $5,000 of an HSA beneficiary’s funeral expenses to be paid as tax‑favored HSA distributions and treats costs paid within 90 days after death as incurred before death.
Introduced March 27, 2025 by Kevin Hern · Last progress March 27, 2025
Allows Health Savings Account (HSA) holders to use HSA funds to pay up to $5,000 in funeral expenses for the account beneficiary without those distributions being treated as nonqualified (taxable) withdrawals. Funeral expenses paid within 90 days after the beneficiary’s death can be treated as incurred immediately before death for this purpose. The change applies to amounts paid after enactment in taxable years ending after enactment.