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.

Bill Number

H.R. 2436

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-03-27: Referred to the House Committee on Ways and Means.

Last Updated

2026-05-13T08:06:39Z

AI-Generated Summary

Purpose

This bill, H.R. 2436, aims to expand the tax benefits of health savings accounts (HSAs) by allowing tax-free withdrawals for certain funeral expenses related to the account holder's death. HSAs are tax-advantaged savings accounts designed for qualified medical expenses, and this change treats qualifying funeral costs as a new category of allowable use.

Key Provisions

• Expansion of Qualified Distributions: Amends Section 223(d)(2)(A) of the Internal Revenue Code to include funeral expenses of the HSA account beneficiary (the person who owns the account) as a qualified distribution, alongside existing items like menstrual care products.
• Definition of Funeral Expenses: Adds a new subparagraph (E) to Section 223(d)(2) defining "funeral expenses" as costs directly related to handling the deceased's remains after death. This includes:
• Burial, cremation, embalming, interment (placing in a grave), or inurnment (placing ashes in an urn).
• Preparation of remains, clothing for the body, casket or urn, hearse services, funeral director fees, venue fees, transportation of remains, grave digging, grave liners, and grave plots.
• Limitation: Total funeral expenses qualifying for tax-free HSA withdrawal cannot exceed $5,000 per beneficiary.
• Coordination with Death Rules: Amends Section 223(f)(8)(B)(ii) to allow funeral expenses incurred within 90 days after the beneficiary's death to be treated as if they occurred just before death, enabling tax-free HSA use even for post-death payments.
• Effective Date: Applies to payments made after the bill's enactment, for tax years ending after that date.

Significant Changes to Existing Law

• Previously, HSA distributions were tax-free only for qualified medical expenses (e.g., doctor visits, prescriptions). This bill adds funeral expenses as a new qualified category, broadening HSA utility beyond health care to end-of-life arrangements.
• Introduces a specific $5,000 cap on funeral-related withdrawals, which did not exist before.
• Modifies post-death HSA rules to retroactively qualify certain expenses, simplifying tax treatment for estates or survivors managing accounts after the beneficiary's passing.

Potential Impacts

• On Citizens: HSA holders (typically employed individuals with high-deductible health plans) gain flexibility to use pre-tax savings for funeral costs without incurring income taxes or a 20% penalty (normally applied to non-qualified withdrawals). This could ease financial burdens on families during bereavement, especially for those without separate funeral savings.
• On Government Agencies: The Internal Revenue Service (IRS) will need to update guidance, forms, and enforcement for HSA reporting, potentially leading to slightly reduced tax revenue from fewer penalized withdrawals. No major administrative overhaul is expected.
• On International Relations: None; this is a domestic tax policy change with no foreign implications.

Main Stakeholders Affected

• HSA Account Holders and Their Families: Primary beneficiaries, as they can access funds tax-free for funerals, potentially saving thousands in taxes.
• Funeral Service Providers: May see increased use of HSA payments, streamlining transactions but requiring awareness of tax rules.
• IRS and Taxpayers: IRS handles implementation; broader HSA use could affect overall tax collections minimally.
• Financial Institutions: Banks and HSA custodians must adjust account management and reporting systems to accommodate the new qualified expense category.

Notable Legal, Constitutional, or Political Implications

• Legal: Strengthens HSA flexibility under tax law without altering core eligibility rules, reducing potential disputes over post-death withdrawals. The $5,000 limit prevents abuse while aligning with average funeral costs (around $7,000–$12,000 nationally, per industry data).
• Constitutional: No apparent issues; it involves straightforward congressional authority over taxation under Article I, Section 8 of the U.S. Constitution.
• Political: Represents a modest expansion of tax incentives for personal savings, appealing to proponents of financial planning and health care affordability. It could influence broader debates on tax relief for end-of-life expenses but is unlikely to spark major controversy as a targeted, non-partisan adjustment.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Hern, Kevin [R-OK-1]

Cosponsors (11)

Rep. Schmidt, Derek [R-KS-2], Rep. Carey, Mike [R-OH-15], Rep. Meuser, Daniel [R-PA-9], Rep. Davis, Donald G. [D-NC-1], Rep. Steube, W. Gregory [R-FL-17], Rep. Ross, Deborah K. [D-NC-2], Rep. Fitzgerald, Scott [R-WI-5], Rep. Tiffany, Thomas P. [R-WI-7], Rep. Van Orden, Derrick [R-WI-3], Rep. Hamadeh, Abraham J. [R-AZ-8], Rep. Yakym, Rudy [R-IN-2]

Recent Actions

• 2025-03-27: Referred to the House Committee on Ways and Means.
• 2025-03-27: Introduced in House
• 2025-03-27: Introduced in House

Bill Versions

• 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. — issued 2025-03-27 — PDF (3 pages)