The "Lowering Costs for Caregivers Act of 2025" expands the use of health savings accounts, flexible spending arrangements, health reimbursement arrangements, and Archer MSAs to include medical expenses of parents, allowing more flexible use of these funds for elder care. These changes aim to provide tax relief and greater financial flexibility for families supporting their parents' healthcare needs.
Vern Buchanan
Representative
FL-16
The "Lowering Costs for Caregivers Act of 2025" expands the use of tax-advantaged health accounts, including HSAs, FSAs, HRAs and Archer MSAs, to cover medical expenses of parents. This allows individuals to use these funds for their parents' or their spouse's parents' medical care. These changes aim to provide financial relief to caregivers by allowing pre-tax dollars to be used for elder care. The provisions apply to expenses and contributions made after December 31, 2024.
New Bill Lets You Use HSAs and FSAs for Parents' Medical Bills, Starting 2025
The "Lowering Costs for Caregivers Act of 2025" is pretty straightforward: it lets you use tax-advantaged accounts like HSAs, FSAs, HRAs, and Archer MSAs to pay for your parents' or your in-laws' medical expenses. Right now, those accounts are generally limited to you, your spouse, and your dependents. This bill changes that, effective after December 31, 2024.
Caregiving Cash Crunch
This bill is tackling the growing financial strain of caring for aging parents. Many folks in their 30s and 40s are finding themselves financially responsible for their parents' healthcare, on top of their own expenses. This bill aims to provide some relief by letting people tap into those pre-tax dollars for parental care.
Who Gets a Boost?
If you're contributing to an HSA, FSA, HRA or Archer MSA, you'll have more flexibility in how you use those funds. If you're helping cover your mom's doctor bills, or your father-in-law needs a new prescription, you could pay for it directly from these accounts, saving you money on taxes. For example, if a daughter is currently paying $500 a month out-of-pocket for her mother's prescriptions, she could instead use her HSA, potentially saving hundreds in taxes annually, depending on her tax bracket. (SEC. 2, SEC. 3, SEC.4)
The Fine Print
- HSA Expansion: The bill amends section 223(d)(2)(A) of the Internal Revenue Code to allow HSA funds to cover expenses for parents and parents-in-law. (SEC. 2)
- FSA/HRA Flexibility: Section 105 of the Internal Revenue Code is updated to allow FSA and HRA funds for parents' and in-laws' medical care, without messing up the tax benefits of these arrangements. (SEC. 3)
- Archer MSA Inclusion: Similar to HSAs, Archer MSAs get the same treatment, with section 220(d)(2)(A) being amended. (SEC. 4)
- Effective Date: All these changes kick in for expenses incurred after December 31, 2024. (SEC. 2, SEC. 3, SEC.4)
Potential Downsides and Long-Term Effects
It's worth noting that people with higher incomes, who are more likely to max out contributions to these tax-advantaged accounts, might benefit the most. Also, there is the reality that verifying whether expenses are truly eligible medical expenses could be tricky. However, the overall aim is clear: to lighten the financial load on those caring for aging relatives, giving them more financial breathing room.