This Act doubles the tax-free amount public safety officers can receive from government retirement plans to cover health and long-term care insurance premiums, increasing the exclusion from $3,000 to $6,000 starting in tax years after 2025.
Don Bacon
Representative
NE-2
The Public Safety Retirees Healthcare Protection Act of 2025 aims to increase the amount of tax-free income public safety officers can receive from their government retirement plans to cover healthcare costs. Specifically, this bill doubles the current annual exclusion limit from $\$3,000$ to $\$6,000$. This increased tax benefit will apply to distributions taken in tax years beginning after December 31, 2025.
Retired Public Safety Officers Get Double Tax Break for Healthcare Premiums Starting 2026
The “Public Safety Retirees Healthcare Protection Act of 2025” is a focused piece of legislation designed to give a financial break to retired public safety officers—think retired police, firefighters, and EMTs—who are paying for health and long-term care insurance.
Doubling Down on the Tax Exclusion
Right now, if you’re a retired public safety officer, you can take up to $3,000 from your government retirement plan tax-free each year, provided you use that money directly to pay for qualified health or long-term care insurance premiums. This bill doubles that exclusion limit. Under Section 2, the maximum amount a retired officer can exclude from their gross income jumps from $3,000 to a much more significant $6,000 annually. This is a direct tax benefit aimed at offsetting the rising costs of healthcare coverage in retirement.
What This Means for Your Budget
For the retired officer, this change is straightforward: less taxable income means less tax paid. Imagine a retired firefighter currently using the full $3,000 exclusion. If they spend $6,000 or more annually on premiums, they must report the remaining $3,000 (or more) of their distribution as taxable income. Once this bill takes effect, that entire $6,000 used for premiums can be taken out tax-free. If you’re in a 22% tax bracket, that extra $3,000 exclusion translates into roughly $660 back in your pocket every year—money that stays in the household budget instead of going to the IRS. This is a targeted effort to improve the financial security of those who spent their careers in high-stress, physically demanding jobs.
When the Change Kicks In
Don't run to your tax advisor just yet. This higher $6,000 exclusion isn't immediate. The bill specifies that this change applies to distributions taken in tax years beginning after December 31, 2025. So, you’ll see this benefit reflected on your tax return for the 2026 tax year and beyond. While the impact on the federal budget will be a minor reduction in tax revenue due to the increased exclusion, the benefit to the targeted group is clear and immediate: more money for essential healthcare coverage.