Caregiver Relief Bill Allows Parents to Fund Adult Children's HSAs and Use FSAs for In-Laws Starting 2026

The “Lowering Costs for Caregivers Act of 2025” is a targeted piece of legislation aimed squarely at the “sandwich generation”—those of us juggling our own finances while helping aging parents. This bill doesn't introduce massive new programs, but rather tweaks the rules around existing tax-advantaged health savings accounts (HSAs), Flexible Spending Arrangements (FSAs), and Health Reimbursement Arrangements (HRAs) to make it easier to pay for mom and dad’s medical bills.

The Family Contribution Plan: HSAs Get an Upgrade

Right now, if you have an HSA, only you, your employer, or your spouse can contribute money to it. This bill changes that rule under Section 223(d)(2)(A) of the tax code. Starting after December 31, 2025, your parents or your spouse’s parents can also contribute money directly to your HSA.

Think about this in real terms: Say you’re a 35-year-old software engineer with a high-deductible plan and an HSA. Your parents, who are doing well financially, want to help you cover your family’s high deductible or save for future expenses. Currently, they’d have to give you cash, which you then deposit. This new rule cuts out the middle step, allowing them to contribute directly and potentially simplify tax filings for all involved. It’s a small, technical change, but it recognizes that financial support often flows both ways in families.

Using Your FSA/HRA for the Folks

This is the biggest change for people actively providing care. FSAs and HRAs are use-it-or-lose-it or employer-funded accounts that let you pay for qualified medical expenses tax-free. The catch is that “qualified medical expenses” are usually limited to you, your spouse, and your dependents.

Section 3 of this bill expands the definition of who you can spend that tax-free money on. Specifically, it allows you to use your FSA or HRA funds to cover medical costs for your parent or your spouse’s parent without jeopardizing the account’s tax-advantaged status. This means if your mother-in-law needs a specialist visit or prescription that you’re paying for, you can use your pre-tax FSA dollars to cover it. This is huge for caregivers, as it immediately makes your existing benefits more flexible and useful for elder care. This provision, along with a similar update for Archer MSAs (Section 4), becomes effective for expenses paid after December 31, 2025.

The Real-World Impact: More Flexibility, Not Immediate Cash

This bill doesn't hand out new money; it just makes the money you already have or save go further, tax-free. For the busy professional whose parents are starting to need more medical attention, this provides a cleaner way to manage those costs. Instead of paying for a parent’s co-pay with post-tax dollars, you can now use your pre-tax FSA or HRA money, saving you money on taxes.

The main challenge here is the timing. None of these changes kick in until January 1, 2026. So, while the relief is coming, caregivers won't see this increased flexibility until the start of the next tax year. However, for those of us navigating the complex and expensive world of family caregiving, any move that expands the utility of tax-advantaged savings is a welcome simplification.