This bill amends the Internal Revenue Code to classify health care sharing ministry memberships as medical expenses, not insurance, for tax purposes, starting after December 31, 2025.
Ted Budd
Senator
NC
This bill amends the Internal Revenue Code to classify health care sharing ministry memberships, including shared medical expenses and administrative fees, as medical expenses. It clarifies that these ministries are not considered health plans or insurance for tax purposes. This change applies to taxable years beginning after December 31, 2025.
Tax Break for Health Care Sharing Ministries Kicks Off in 2026: New Bill Treats Membership Fees as Medical Expenses
This bill changes the tax code to let members of health care sharing ministries (HCSMs) deduct their membership costs as medical expenses, starting in the 2026 tax year. It also makes it crystal clear that, for tax purposes, these ministries aren't considered health insurance.
Deductible Dues
The core of the bill amends Section 213(d)(1) of the Internal Revenue Code. What does that mean in plain English? If you're part of a qualifying HCSM, the money you pay for membership – both the cost of sharing medical expenses and any administrative fees – can be counted as a medical expense when you file your taxes. Think of it like adding those costs to your other medical bills (doctor visits, prescriptions, etc.) when figuring out if you can deduct medical expenses.
Real-world example: Imagine Sarah, a freelance graphic designer, pays $400 a month to be part of a health care sharing ministry. Under this new rule, she could potentially deduct that $4,800 annual cost as a medical expense, provided she meets the IRS rules for itemizing deductions.
Not Insurance, Says the IRS
The bill also adds a new section (7702C) to the tax code, stating loud and clear that HCSMs are not health plans or insurance. This is important because it separates these ministries from the regulations and requirements that apply to traditional insurance companies.
Real-World Ripple Effects
- Tax Savings: For people who itemize deductions and are part of HCSMs, this could mean a lower tax bill.
- More HCSM Members?: This tax break might make HCSMs a more attractive option, potentially drawing people away from traditional insurance.
- What Counts as an HCSM? The bill relies on the existing definition of a health care sharing ministry, but those definitions can vary, and that might cause some headaches down the road.
The Bottom Line
This bill offers a potential tax benefit for people in health care sharing ministries, but it also raises some questions. How will this impact the insurance market? Will it lead to clearer rules for HCSMs? Those are things we'll be watching closely as this law takes effect in 2026.