This bill amends the Internal Revenue Code to prohibit the use of tax-advantaged health accounts for non-excepted abortion expenses, subjecting such payments to tax penalties.
Mike Lee
Senator
UT
The Protecting Life in Health Savings Accounts Act amends the Internal Revenue Code to prohibit the use of tax-advantaged health accounts—including HSAs, FSAs, and HRAs—for abortion expenses, with limited exceptions for cases of rape, incest, or medical necessity. Under this bill, using these funds for non-excluded abortions would no longer qualify for tax-free treatment and would be subject to tax penalties. These changes are set to take effect for taxable years beginning after December 31, 2025.
New Tax Rule Targets Health Savings Accounts: Most Abortion Costs to Face Penalties Starting in 2026
The 'Protecting Life in Health Savings Accounts Act' changes the tax treatment of your medical savings by excluding most abortion procedures from being considered 'qualified medical expenses.' Starting in the 2026 tax year, if you use funds from a Health Savings Account (HSA), Flexible Spending Arrangement (FSA), or Health Reimbursement Arrangement (HRA) to pay for an abortion, that money will no longer be tax-free. Instead, those funds will be treated as taxable income and, in the case of HSAs, could trigger additional tax penalties for non-qualified withdrawals.
The New Definition of 'Qualified'
Under this bill, the only abortions that remain tax-exempt are those the legislation defines as 'excluded abortions.' This narrow list covers only pregnancies resulting from rape or incest, or cases where a physician certifies that a physical illness or injury puts the woman in danger of death unless the procedure is performed. For a worker who has been diligently putting pre-tax dollars into an FSA to cover reproductive healthcare, this means any procedure falling outside these specific categories would now have to be paid for with post-tax dollars, effectively increasing the out-of-pocket cost by whatever their effective tax rate happens to be.
Impact on Your Wallet and Benefits
This shift hits several types of accounts you might use at work or in retirement. Beyond standard HSAs and FSAs, the bill specifically amends Section 401(h) to include retiree health accounts and Section 220 for Archer MSAs. Imagine an office manager who uses her HRA to manage family planning costs; under these rules, her employer would be barred from providing tax-free reimbursement for most abortion services. Because the bill is quite specific (Low Vagueness), there is little room for interpretation: if the procedure isn't to save a life or due to a reported crime, the tax-advantaged status of those healthcare dollars simply vanishes.
Implementation and Long-Term Costs
The changes are set to roll out for tax years beginning after December 31, 2025. While the bill aligns tax policy with specific moral stances by ensuring federal tax breaks don't subsidize these procedures, it creates a new financial hurdle for individuals managing their own healthcare via private savings. For those in lower tax brackets who rely on the 'stretch' of pre-tax dollars to afford medical care, the loss of this tax-exempt status represents a direct increase in the cost of care and a new layer of administrative complexity when filing taxes or documenting medical necessity for the few remaining exceptions.