The PAW Act of 2025 would expand what counts as medical care for tax-advantaged accounts (Health Savings Accounts and Flexible Spending Accounts) by allowing certain veterinary expenses and pet-related costs to be treated as medically eligible. Specifically, it would: - Treat amounts paid for veterinary care or a pet health insurance plan for a service animal as medical care with no cap, making those costs eligible for reimbursement through HSAs and FSAs. - For ordinary pets (non-service animals), cap the eligible veterinary expenses at $1,000 per pet for veterinary care and $1,000 per pet for a pet health insurance plan per year. These caps would be annually adjusted for inflation after 2025. - Define key terms (pet, service animal, and veterinary care) and specify what counts as veterinary care (diagnosis, treatment, tests, medicines, equipment, etc., as prescribed by a licensed veterinarian). - Apply to amounts paid or incurred after the enactment date. In short, the bill would broaden access to tax-advantaged medical accounts for pet-related costs, with service animals receiving a broader, uncapped treatment and ordinary pets receiving a per-pet annual cap (subject to inflation adjustments).
Key Points
- 1Expands eligibility: Certain veterinary expenses and pet health insurance costs can be treated as medical care for HSAs and FSAs.
- 2Service animals carve-out: All veterinary care and pet insurance costs for a service animal are eligible as medical care, with no specified cap.
- 3Ordinary pets cap: For non-service animals, up to $1,000 per year for veterinary care and up to $1,000 per year for pet health insurance per pet can be treated as medical care.
- 4Inflation adjustments: Beginning after 2025, the per-pet caps for ordinary pets rise with the cost-of-living adjustment and are rounded to the nearest $50.
- 5Definitions and scope: The bill relies on existing definitions for “pet” and “service animal” and defines “veterinary care” to include typical veterinary services and prescribed items.