New Diaper Affordability Act Makes Diapers Tax-Free and HSA/FSA Eligible Starting 2025

The Improving Diaper Affordability Act of 2025 is a straightforward effort to cut the cost of keeping babies clean and healthy. This bill aims to tackle what policy folks call “diaper need”—the struggle nearly half of all families with young kids face to afford this essential product. Starting after December 31, 2024, the bill attacks the cost problem from two directions: expanding what tax-advantaged accounts can cover and eliminating sales tax at the checkout counter.

The Fine Print: Diapers Are Now a Medical Expense

If you have a Health Savings Account (HSA), a Flexible Spending Arrangement (FSA), or a Health Reimbursement Arrangement (HRA) through your employer, this is a big change. Under Section 3, diapers are now officially considered a qualified medical expense. This means you can use your pre-tax dollars from these accounts to buy diapers for your kids. This is huge because it immediately gives families a 20% to 30% discount, depending on their tax bracket, on an expense that currently runs between $945 and $1,500 per child annually. The bill also extends this coverage to Dependent Care Assistance Programs and Dependent Care FSAs, recognizing that diapers are a fundamental cost of childcare.

For the working parent juggling a budget, this change is immediate relief. Instead of paying for diapers with money that’s already been taxed, you can now use the funds you set aside before taxes were taken out. It’s essentially a subsidized discount program for families already utilizing employer benefits.

Goodbye, Sales Tax: Saving Money at the Register

Section 4 of the bill takes the tax relief a step further by banning state and local governments from charging a retail sales or use tax on diapers. This is designed to provide immediate relief at the point of purchase. While a few states already exempt diapers, many do not, meaning that every time a family buys a box of diapers, they are currently paying an extra 5% to 10% in taxes, depending on where they live.

This provision guarantees that when you buy diapers, the price you see on the shelf is the price you pay, period. For low-income families, who often spend 2.6 times more of their income on diapers than higher-earning families, eliminating this sales tax layer provides critical savings right when they need it most. However, this is where the bill hits state and local budgets. Those governments will lose the revenue they currently collect from diaper sales, which could lead to minor adjustments in other areas of their budgets to compensate for the lost tax income.

Why This Matters for the Busy Parent

This legislation is grounded in some pretty tough realities. The findings in Section 2 highlight that diaper scarcity forces parents to miss work—about 5.1 workdays a month, on average, for those struggling to afford them—because daycares usually require a full supply of diapers. Missing that much work at minimum wage can cost almost $300 a month, compounding the financial strain. By making diapers cheaper and easier to acquire, this bill is designed not just to improve child health (reducing rashes and infections) but also to stabilize employment for parents who can’t afford to miss work. It’s a policy designed to keep parents on the job and kids healthy, all by streamlining how we pay for an item that is, quite literally, non-negotiable for anyone with a baby.