This bill amends the tax code to allow payments to health care sharing ministries to be treated as deductible medical expenses and clarifies that these ministries are not considered insurance for tax purposes, effective for tax years beginning after December 31, 2025.
Mike Kelly
Representative
PA-16
This bill amends the Internal Revenue Code to officially treat payments made to a qualified health care sharing ministry as a deductible medical expense for tax purposes. Furthermore, the legislation clarifies that, for federal tax purposes, these ministries will no longer be considered health insurance plans. These changes are set to take effect for tax years beginning after December 31, 2025.
Tax Break for Healthcare Sharing Ministries: Membership Fees Could Be Deductible Starting 2026
This legislation aims to change how the IRS treats payments made to health care sharing ministries (HCSMs), which are organizations whose members share medical expenses based on common religious or ethical beliefs. Starting with the 2026 tax year, if you’re a member of one of these ministries, your membership payments and administrative fees could be treated as a deductible medical expense on your federal taxes. This is a big deal because right now, those payments generally don’t qualify for the deduction, even though they cover healthcare costs. The bill amends Section 213(d)(1) of the Internal Revenue Code to make this happen.
The Tax Break: What It Means for Your Wallet
For the busy person juggling bills, this change is a potential win if you use an HCSM. Right now, to deduct medical expenses, you have to itemize and your total costs must exceed 7.5% of your Adjusted Gross Income (AGI). By allowing HCSM payments to count, this bill makes it easier for members to cross that AGI threshold and claim the deduction. Think of a small business owner who pays $6,000 a year into an HCSM. Currently, that $6,000 doesn't help them reach the deduction limit. Under this bill, that amount counts, potentially lowering their taxable income and saving them real money.
The Catch: Not Insurance, Officially
Here’s where it gets interesting—and potentially complicated. While the bill gives HCSMs tax parity with traditional insurance by making the payments deductible, it simultaneously makes a very clear distinction: for tax purposes, HCSMs will not be considered a “health plan” or “insurance.” The bill adds a new section, 7702C, to the tax code to cement this separation. This is crucial because it confirms that HCSMs are not subject to the same federal regulations, consumer protections, or mandates (like covering pre-existing conditions or essential health benefits) that apply to traditional health insurance plans.
The Real-World Trade-Off
This legislation presents a classic trade-off for consumers. On one hand, it offers a tangible financial benefit—a tax deduction—to individuals and families who choose HCSMs, recognizing that these payments are indeed used for healthcare. This could make HCSMs more attractive to budget-conscious people looking for alternatives to high-premium insurance. On the other hand, by formally codifying the lack of insurance status for tax purposes, the bill reinforces the fact that members are relying on faith-based agreements, not legally guaranteed contracts, for their medical coverage. If you’re considering an HCSM, you need to understand that the tax break comes with the trade-off of less regulatory oversight compared to a traditional plan, which could leave you exposed if a ministry fails to share expenses.