To amend the Internal Revenue Code of 1986 to treat distributions from health savings accounts for funeral expenses of the account beneficiary as qualified distributions.
This bill would expand Health Savings Accounts (HSAs) rules to treat funeral expenses of the account beneficiary as a qualified, tax-free distribution. Specifically, it adds funeral expenses to the list of what can be paid from an HSA without tax penalties, up to a per-beneficiary cap of $5,000. It provides a broad definition of what counts as funeral expenses (covering items such as burial, cremation, embalming, transportation, caskets, hearse services, funeral director services, venue fees, and grave-related costs). The bill also adds a special timing rule: during the 90 days after the account beneficiary’s death, funeral expenses can be treated as if incurred immediately before death for purposes of qualification. The changes would apply to amounts paid after enactment in tax years ending after enactment. In short, the bill would help families pay funeral costs using tax-advantaged HSA funds, with a $5,000 per beneficiary cap, and with specific timing rules to ensure timing doesn’t block qualification.
Key Points
- 1Adds funeral expenses to the list of qualified distributions from HSAs, alongside the already included category of menstrual care products.
- 2Defines “funeral expenses” to include a broad set of costs associated with the care and disposition of remains (burial, cremation, embalming, interment, transportation, clothing for remains, casket/urn, hearse, funeral director services, venue, grave-related costs, and related preparation).
- 3Establishes a $5,000 aggregate cap on funeral expenses treated as qualified distributions per account beneficiary.
- 4Adds a timing rule: for the 90 days after a beneficiary’s death, funeral expenses can be treated as if incurred immediately before death for purposes of qualification.
- 5Effective date: applies to amounts paid after enactment, in tax years ending after enactment.