Health Savings Accounts (or “HSAs”) have both advantages and disadvantages relative to Flexible Spending Accounts when paying for health expenses with un-taxed dollars. However, the IRS has recently announced exceptions to certain disadvantages that would otherwise limit HSA expenditures to test for or treat COVID-19 as follows:
- Payments Won’t Cause Tax Even If Deductible Not Met: The IRS announced that payments from an HSA that are made to test for or treat COVID-19 don’t affect the status of the account as an HSA (and don’t cause a tax for the account holder) even if the HSA deductible hasn’t been met.
- Note: Vaccinations continue to be treated as preventative measures that can be paid for without regard to the deductible amount.
IRS Information Site: Ongoing information on the IRS and tax legislation response to COVID- 19 can be found here.