Bill Aims to Ease Caregiver Costs: Use FSAs for Parents' Medical Bills, Parents Can Chip into Your HSA Starting 2026

The "Lowering Costs for Caregivers Act of 2025" is on the table, aiming to give a financial hand to those looking after their parents. Effective for amounts paid or expenses incurred after December 31, 2025, this bill proposes two main types of changes to how you can use certain tax-advantaged health accounts. First, it would allow you to use your Flexible Spending Arrangement (FSA) and Health Reimbursement Arrangement (HRA) funds for your parents' or in-laws' medical bills. Second, it would open the door for your parents or in-laws to contribute directly to your Health Savings Account (HSA) or Archer Medical Savings Account (MSA).

Tapping Into Your FSA and HRA for Parental Care

This is arguably the most direct financial relief for caregivers proposed by the bill. If you're managing Mom's prescription co-pays or Dad's specialist visit fees, Section 3 of this act could offer significant help. Currently, FSAs – those accounts funded with pre-tax dollars from your paycheck – and HRAs, which are employer-funded, are generally restricted for your own medical expenses, or those of your spouse and tax dependents. This bill seeks to amend Section 105 of the Internal Revenue Code. If it passes, starting in 2026, you could use funds from your FSA or HRA for the medical care of your parents or your spouse's parents, even if they don't qualify as your dependents. Crucially, the bill states that amounts used for your parents' care wouldn't be added to your gross income, preserving the tax advantages of these accounts. For example, if your parent (not a tax dependent) incurs a $300 medical bill, you could potentially use $300 from your FSA, effectively paying that bill with pre-tax money.

HSAs and Archer MSAs: A New Avenue for Contributions

For Health Savings Accounts (HSAs) and the less common Archer Medical Savings Accounts (MSAs), the bill introduces a different kind of change. These accounts allow you to save money tax-free for qualified medical expenses. Sections 2 and 4 of the Act propose amendments to the Internal Revenue Code (specifically sections 223(d)(2)(A) for HSAs and 220(d)(2)(A) for Archer MSAs). The key change here is that your parents or your spouse's parents would be eligible to contribute directly to your HSA or Archer MSA. This provision would also take effect after December 31, 2025. It's important to note that this specific change concerns who can put money into your account; it doesn't alter the existing rules about whose medical expenses you can pay for using your HSA or MSA funds (which generally remains for yourself, your spouse, and your tax dependents). However, if your parents were to contribute to your HSA, it would boost your personal health savings with tax-advantaged dollars, potentially freeing up your other funds for different needs, including caregiving.

The Bottom Line for Caregivers

The "Lowering Costs for Caregivers Act of 2025" offers a practical approach to easing some of the financial pressures many caregivers face. The ability to use FSA and HRA funds directly for parental medical expenses is a straightforward benefit that could translate to real savings. The change to HSA and Archer MSA contributions provides a new way for families to support each other's health savings goals. With these changes slated for after December 31, 2025, individuals who are caregivers will want to watch this bill to see how it might affect their financial planning for parental care.