HOPE Act of 2025

Bill Number

H.R. 955

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-02-04: Referred to the House Committee on Ways and Means.

Last Updated

2026-03-04T09:06:24Z

AI-Generated Summary

Purpose of the Legislation

The Health Out-of-Pocket Expense Act of 2025 (HOPE Act of 2025) aims to create a new type of tax-advantaged savings account called a HOPE Account. These accounts are designed to help individuals and families pay for out-of-pocket medical expenses (like deductibles, copays, or other qualified health costs) on a tax-free basis, while reforming certain health-related tax rules in the Internal Revenue Code (IRC). The goal is to provide an alternative to existing accounts like Health Savings Accounts (HSAs) for people with health insurance, promoting savings for healthcare costs without tax penalties.

Key Provisions

• Establishment of HOPE Accounts:
• HOPE Accounts are trusts set up exclusively to pay qualified medical expenses (defined similarly to HSA rules, covering costs like doctor visits, prescriptions, and treatments not covered by insurance).
• Must be managed by a qualified trustee (e.g., a bank or insurance company) with strict rules: contributions only in cash, no investment in life insurance, non-commingled assets, and reasonable fees.
• Accounts are nonforfeitable (owner can't lose interest in the balance) and require reporting to ensure distributions are for qualified expenses.

• Eligibility:
• Available to "eligible individuals" who have minimum essential health coverage (e.g., employer plans or Marketplace insurance) or, for certain Native American tribes, Indian Health Service coverage.
• Cannot contribute to conflicting accounts in the same month, such as FSAs (Flexible Spending Accounts), HSAs, HRAs (Health Reimbursement Arrangements), or Archer MSAs (Medical Savings Accounts), except for limited exceptions.

• Contribution Limits:
• Annual cap: Up to $4,000 for self-only or married filing separately/jointly with family coverage; $8,000 for head-of-household with family coverage (prorated monthly based on eligibility).
• Limits adjust for inflation starting in 2026, rounded to the nearest $50.
• No tax deduction for personal contributions, but employer or certain government contributions (e.g., from Medicaid waivers) are excluded from income if the individual's prior-year adjusted gross income (AGI) is under $100,000 ($200,000 for joint filers).
• Third-party contributions (e.g., from employers or state programs) limited to 50% of the cap.
• Coordinated with other accounts to avoid exceeding overall limits.

• Tax Treatment of Distributions:
• Tax-free if used for qualified medical expenses of the beneficiary, spouse, or dependents.
• Non-qualified distributions are taxable as income plus a 30% penalty (exceptions for death, disability, or rollovers to another HOPE Account within 60 days).
• Excess contributions can be withdrawn penalty-free before tax filing deadline, with any earnings taxed.
• Distributions don't count toward the medical expense deduction on tax returns.

• Employer and Reporting Rules:
• Employer contributions treated as tax-free benefits (up to limits), but only for employees with AGI under $100,000 ($200,000 joint).
• Employers must offer comparable contributions to avoid penalties (similar to HSA rules).
• Trustees must report contributions and distributions annually (e.g., on Form 5498-A) and coordinate with FSA contributions.

• Other Rules:
• Applies community property laws, divorce transfers, and death beneficiary rules similar to HSAs.
• Prohibited transactions (e.g., self-dealing) trigger penalties.
• Effective for taxable years beginning after December 31, 2025.

Significant Changes to Existing Law

• Adds a new IRC Section 530A to create HOPE Accounts, modeled after HSAs (Section 223) but with unique features like higher contribution limits, no personal deduction, AGI caps for exclusions, and a 30% penalty on non-qualified withdrawals (vs. 20% for HSAs).
• Amends excess contribution penalties (Section 4973) to include HOPE Accounts.
• Expands employer-provided coverage exclusions (Section 106) and reporting requirements (Sections 6051, 6693) to cover HOPE contributions.
• Updates cafeteria plan rules (Section 125) and employer comparability penalties (Section 4980G) to integrate HOPE Accounts.
• Applies prohibited transaction rules (Section 4975) to these accounts, treating violations like those for IRAs or HSAs.

Potential Impacts

• On Citizens: Provides a new tool for middle-income families (AGI under $100,000/$200,000) to save tax-free for medical costs, potentially reducing financial stress from high-deductible plans. However, the 30% penalty on misuse may discourage non-medical withdrawals, and coordination with other accounts could limit flexibility.
• On Government Agencies: The IRS will need to develop guidance, forms, and enforcement for HOPE Accounts, including inflation adjustments and reporting. The Department of Health and Human Services may approve state Medicaid contributions. Could lead to modest tax revenue loss from exclusions but offset by penalties on non-qualified uses.
• On International Relations: No direct impact, as this is a domestic tax policy focused on U.S. residents and health coverage.

Main Stakeholders Affected

• Individuals and Families: Eligible insured individuals (especially those with employer or Marketplace coverage) who want to save for out-of-pocket costs; benefits skewed toward lower/middle AGI earners due to income limits.
• Employers: Must consider offering contributions as benefits, facing penalties for non-comparability; may integrate with existing wellness programs.
• Financial Institutions: Banks and insurers acting as trustees, gaining new account management opportunities but with compliance burdens.
• Government Entities: IRS (administration and reporting); state Medicaid programs (potential contributions via waivers); Treasury (guidance issuance).
• Healthcare Providers: Indirectly, as tax-free payments could increase patient ability to cover costs, potentially boosting utilization.

Notable Legal, Constitutional, or Political Implications

• Legal: Strengthens tax incentives for health savings without altering core insurance mandates (e.g., ACA's minimum essential coverage). Aligns with existing IRC structures for HSAs/IRAs, reducing litigation risk, but requires Secretary of Treasury guidance to clarify "reasonable" procedures and reporting—potential for future regulations or challenges if ambiguities arise.
• Constitutional: No apparent issues; falls under Congress's taxing and spending powers (Article I, Section 8). Does not infringe on free speech, privacy, or equal protection, though AGI limits could face scrutiny if seen as discriminatory (unlikely, as similar to other tax benefits).
• Political: Bipartisan sponsors (Democrats and Republicans) suggest broad appeal as a "reform" to address rising healthcare costs without overhauling the ACA. Could appeal to conservatives favoring market-based savings and liberals supporting affordability, but critics might argue it favors the insured over uninsured or adds complexity to tax code. Potential for expansion in future budgets if popular.

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

Sponsor

Rep. Moore, Blake D. [R-UT-1]

Cosponsors (18)

Rep. Panetta, Jimmy [D-CA-19], Rep. Fitzpatrick, Brian K. [R-PA-1], Rep. Schneider, Bradley Scott [D-IL-10], Rep. Smith, Adrian [R-NE-3], Rep. Ruiz, Raul [D-CA-25], Rep. Valadao, David G. [R-CA-22], Rep. Dingell, Debbie [D-MI-6], Rep. Moolenaar, John R. [R-MI-2], Rep. Davis, Donald G. [D-NC-1], Rep. Kennedy, Mike [R-UT-3], Rep. Suozzi, Thomas R. [D-NY-3], Rep. Pfluger, August [R-TX-11], Rep. Carbajal, Salud O. [D-CA-24], Rep. Carey, Mike [R-OH-15], Rep. Gottheimer, Josh [D-NJ-5], Rep. Cline, Ben [R-VA-6], Rep. Harder, Josh [D-CA-9], Rep. Hurd, Jeff [R-CO-3]

Recent Actions

• 2025-02-04: Referred to the House Committee on Ways and Means.
• 2025-02-04: Introduced in House
• 2025-02-04: Introduced in House

Bill Versions

• Health Out-of-Pocket Expense Act of 2025 — issued 2025-02-04 — PDF (22 pages)