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.
- Sponsor
- Rep. Hern, Kevin [R-OK-1]
- Committees
- Ways and Means Committee (primary)
- Last action
- Mar 27, 2025
Bottom line
H.R. 2436 expands the permissible uses of Health Savings Accounts to include up to $5,000 in funeral expenses for the account holder, providing a tax-advantaged way to cover end-of-life costs.
What it actually does
This bill amends the Internal Revenue Code of 1986 to allow distributions from Health Savings Accounts (HSAs) to be used for funeral expenses of the account beneficiary without incurring a tax penalty. It defines eligible funeral expenses and sets a maximum aggregate limit of $5,000 per beneficiary. Additionally, it allows funeral expenses incurred within 90 days after the beneficiary's death to be treated as if they were incurred immediately before death, ensuring they qualify for tax-free distribution.
Proponents argue
Supporters argue that this bill provides much-needed financial relief to grieving families by allowing them to use their pre-tax health savings for an inevitable and often significant expense. They contend that it aligns with the spirit of HSAs as a tool for managing health-related and end-of-life financial burdens, reducing stress during a difficult time.
Opponents contend
Critics might argue that expanding the scope of HSAs beyond direct healthcare costs could erode the primary purpose of these accounts and lead to a further reduction in federal tax revenue through expanded tax expenditures. Some may also contend that funeral expenses, while significant, are not directly health-related and should not be covered by a health savings vehicle.
The bill is extremely short and straightforward, making it very accessible for any reader to understand its provisions quickly.
Section 1(a) and 1(b)
Allowing HSA Distributions for Funeral Expenses
This provision amends the tax code to explicitly include "funeral expenses of the account beneficiary" as a qualified distribution from a Health Savings Account (HSA). It defines funeral expenses broadly to include costs associated with burial, cremation, embalming, interment, caskets, urns, hearse services, funeral director fees, and grave plots. A crucial limitation is set, capping the aggregate amount treated as funeral expenses at $5,000 per account beneficiary.
Supporters argue
Supporters argue that this provision offers practical financial assistance to families during a vulnerable time, allowing them to leverage their existing health savings for a predictable, albeit unfortunate, life event. They contend it reduces the financial strain associated with end-of-life arrangements.
Critics contend
Opponents might argue that this expands the scope of HSAs beyond their intended purpose of healthcare costs, potentially setting a precedent for further non-health-related expansions. They may also point to the associated loss in tax revenue as a concern.
Tradeoffs
The bill balances the desire to provide financial relief for funeral costs with concerns about broadening the tax-advantaged nature of HSAs beyond direct medical expenses and the potential impact on federal revenue.
Section 1(c)
90-Day Lookback for Post-Death Funeral Expenses
This provision clarifies that for a 90-day period immediately following the death of an HSA account beneficiary, any funeral expenses incurred during this period will be treated as if they were incurred immediately before the beneficiary's death. This ensures that these expenses can still be considered qualified distributions from the deceased's HSA, even if the actual payment occurs after their passing.
This provision allows funeral expenses (as defined in the bill) incurred within 90 days after the death of an HSA beneficiary to be treated as if they were incurred immediately before the beneficiary's death.
Section 223(f)(8)(B)(ii)(III) of the Internal Revenue Code, as amended by Section 1(c) of the bill.
Why it matters:This is standard legislative practice for technical clarifications and coordination with existing tax code sections, ensuring proper application of the new rule.
Case for: Supporters argue this is a necessary practical measure to ensure families can utilize the benefit without being constrained by the exact timing of expense payment during a period of bereavement.
Case against: No specific opposition is typically raised against such technical, clarifying provisions.
Estimated impact: Ensures that the $5,000 funeral expense limit can be fully utilized by families, regardless of whether the expenses are paid immediately or shortly after death.