Direct Primary Care Fees Get Tax Deduction, But Only Up to $150 Monthly Cap Starting in 2026

The Primary Care Enhancement Act of 2025 is focused on making a specific type of healthcare payment—the Direct Primary Care (DPC) model—fit better into our existing tax and savings system. DPC is essentially a subscription model where you pay a fixed monthly fee directly to your doctor for primary care services, skipping the insurance middleman for those routine visits. This bill clarifies two major things: how these fees are treated for tax deductions and whether they mess with your Health Savings Account (HSA).

The $150 Tax Break Catch

Starting in January 2026, if you’re paying for a DPC arrangement, those monthly fees can now be counted as a deductible medical expense under Section 213(d)(1) of the tax code. That’s a win for people who itemize their deductions. However, there’s a hard cap: you can only deduct up to $150 per month for these fees, even if your actual monthly subscription is higher. This limit will be adjusted for inflation starting in 2027, which is a smart move to keep it relevant.

For example, if you pay $200 a month to your DPC physician, only $150 of that counts toward your medical expense deduction. That means the tax benefit is limited, especially for individuals or families who subscribe to higher-end DPC services. While the bill brings welcome clarity, it also draws a line in the sand regarding how much Uncle Sam will subsidize your primary care subscription.

HSA Eligibility Gets a Green Light

One of the biggest headaches for people interested in DPC has been the fear of losing their eligibility to contribute to an HSA. Currently, if you have any other kind of health coverage besides a high-deductible plan, you can’t contribute to an HSA. This bill clears that up. It specifically states that having a DPC arrangement does not count as a “health plan” that would disqualify you from contributing to your HSA. This is huge for digital natives who value the transparency and cost control of DPC but also rely on the tax advantages of an HSA for long-term savings.

When Your Employer Pays: The W-2 Factor

If your employer is the one footing the bill for your DPC arrangement—say, as a wellness benefit—the total amount they pay during the year must now be reported on your W-2 form. This is treated just like other compensation, which means it’s likely going to be considered taxable income for the employee.

This W-2 reporting is where things get tricky. While getting free primary care sounds great, having that cost added to your taxable income could potentially affect your Adjusted Gross Income (AGI). A higher AGI might push you into a higher tax bracket, or, more commonly, reduce your eligibility for certain premium tax credits or other government subsidies tied to income. It’s a classic trade-off: a great benefit now, but potentially a higher tax bill or reduced subsidy later. If your employer pays $2,400 a year for your DPC, expect to see that $2,400 added to your taxable wages starting in 2026.