New Bill Proposes Using Pre-Tax Health Accounts for Private Cord Blood Banking Starting 2025

This bill, the "Family Cord Blood Banking Act," proposes a change to the tax code that could make private cord blood and tissue banking more accessible. Specifically, it aims to classify payments made for these services as qualified "medical care expenses" under Section 213(d)(1) of the Internal Revenue Code. This change would apply to taxable years beginning after December 31, 2024.

Tapping into Tax-Free Health Funds

So, what does classifying this as a medical expense actually mean for you? If this bill passes, you could potentially use funds from tax-advantaged health accounts – think Health Savings Accounts (HSAs), Flexible Spending Arrangements (FSAs), or Health Reimbursement Arrangements (HRAs) – to pay for private umbilical cord blood or tissue banking. Currently, these services often don't qualify for payment with pre-tax dollars. This change could effectively lower the cost for families choosing this option, as they'd be using money that hasn't been taxed.

There's a key condition, though: the services must be provided by a bank that is accredited and meets federal standards outlined in the Public Health Service Act. This requirement aims to ensure that families are using reputable providers.

Who Stands to Benefit?

This change primarily impacts families considering private cord blood banking. For those with a family history of certain diseases treatable with stem cells (like some cancers or genetic disorders), banking cord blood can be seen as a form of biological insurance. Allowing the use of pre-tax dollars could make this decision easier financially. Naturally, accredited private cord blood banks would also likely see increased business.

It's worth noting that tax deductions or using pre-tax funds effectively means slightly less tax revenue collected overall. While the direct benefit goes to those using the service, the cost of the tax break is spread across the broader taxpayer base. However, the main thrust of the bill is expanding the definition of medical care to include this specific preventative health measure for families who choose it, starting from the 2025 tax year.