“To amend the Internal Revenue Code of 1986 to reform certain rules related to health savings accounts.”
No CRS summary available for this bill.
This section specifies that, except as otherwise expressly provided, any amendment to or repeal of a section or other provision in this Act refers to a provision of the Internal Revenue Code of 1986.
This section establishes an income-based phaseout of the deduction for contributions to health savings accounts (HSAs)—tax-advantaged savings vehicles for qualified medical expenses available to individuals with high-deductible health plans—for taxable years beginning after December 31, 2025. The deduction is ratably reduced (but not below zero) for taxpayers whose modified adjusted gross income exceeds applicable thresholds of $300,000 (joint return or surviving spouse), $250,000 (head of household), $150,000 (married filing separately), or $200,000 (all others), with the phaseout range spanning $40,000 ($20,000 for married filing separately). (2) It modifies rules for distributions of non-deductible contributions to apply section 72 income inclusion rules (similar to traditional IRAs) and excludes such contributions from the excise tax on excess contributions. (3) It excludes employer contributions to HSAs from FICA and Railroad Retirement Tax Act wages (if reasonably believed excludable from employee income under section 106(d)) for payments made after December 31, 2025.
This section limits reimbursements from health savings accounts (HSAs)—tax-advantaged savings vehicles for individuals with high-deductible health plans—to distributions made within two years after the qualified medical expense was incurred (previously, no time limit). The change applies to HSA distributions after December 31, 2025. (Thus, later reimbursements are treated as nonqualified distributions, subject to income tax and a 20% penalty unless the account owner is age 65 or older or disabled.)
This section establishes a substantiation requirement for distributions from a health savings account (HSA)—a tax-advantaged account for individuals with high-deductible health plans to pay qualified medical expenses tax-free—such that amounts are not treated as used for qualified medical expenses unless properly substantiated. Specifically, (1) the HSA trustee must determine whether distributions meet the requirement, and (2) provider opinions required for substantiation must be based on a bona fide provider-patient relationship, an in-person or otherwise permissible assessment, and an item or service typically recommended under generally accepted medical standards; the Secretary of the Treasury must issue related regulations. The requirements apply to amounts paid or distributed after December 31, 2025.
This section excludes from qualified medical expenses for health savings accounts (HSAs)—and thus subjects related HSA distributions to tax—spa and beauty treatments and amounts paid for exercise equipment exceeding $500 in any taxable year, effective for amounts paid or distributed after December 31, 2025. (HSAs allow tax-free distributions for qualified medical expenses for individuals enrolled in high-deductible health plans.)
This section imposes an excise tax on the trustee of any health savings account (HSA)—equal to the excess of any covered HSA fee over the reasonable amount determined by the Treasury Secretary—for fees charged after December 31, 2025. Covered fees include maintenance fees, transfer fees, fees for paper statements, checks, or replacement cards, withdrawal fees, insufficient funds fees, fees to ensure fees do not exceed earnings or account balance, and other fees identified by the Secretary. (HSAs, defined in IRC §223, are tax-advantaged savings accounts available to individuals enrolled in high-deductible health plans to pay qualified medical expenses.) It also requires HSA trustees to report annually to the IRS, for each calendar year, on covered fees charged—including descriptions, numbers charged, aggregate amounts, and breakdowns by demographic or other characteristics specified by the Secretary.
This section requires reports under IRC §223(h)(1) on health savings accounts (HSAs)—which trustees must furnish annually to the Secretary of the Treasury and account beneficiaries—to include (1) the average yield on the beneficiary's cash balances in the HSA for the reporting period and (2) the national average yield on savings account balances for such period, as determined by the Secretary. The requirement applies to reports with respect to periods beginning after December 31, 2025.