H.R.2436 - 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. (119th Congress)
Summary
H.R.2436 proposes amending the Internal Revenue Code of 1986 to allow distributions from Health Savings Accounts (HSAs) to cover funeral expenses of the account beneficiary. This would treat such distributions as qualified, similar to those used for medical expenses. The bill sets a limit of $5,000 for funeral expenses that can be covered by the HSA.
It also specifies that these funeral expenses are to be treated as if incurred immediately before the death of the beneficiary, but only for a 90-day period following the death. The changes would apply to amounts paid after the enactment of the Act, in taxable years ending after that date.
Expected Effects
The bill's passage would allow individuals to use their HSAs to pay for funeral expenses, providing a new avenue for covering these costs. This could reduce the financial burden on surviving family members. It also provides a tax benefit, as these distributions would be considered qualified and thus not subject to income tax.
However, it could also slightly reduce the overall funds available for healthcare needs later in life, as the HSA funds are now eligible for use on funeral expenses. The $5,000 limit could be insufficient in some areas where funeral costs are higher.
Potential Benefits
- Provides a tax-advantaged way to pay for funeral expenses.
- Reduces the financial burden on families during a difficult time.
- Offers greater flexibility in using HSA funds.
- Simplifies estate planning by allowing pre-tax funds to be used for end-of-life expenses.
- Could encourage more people to contribute to HSAs, knowing funds can be used for funeral costs.
Most Benefited Areas:
Potential Disadvantages
- May reduce the amount of HSA funds available for healthcare expenses.
- The $5,000 limit may not cover all funeral costs in some areas.
- Could incentivize unnecessary funeral spending.
- Adds complexity to HSA management and tax reporting.
- May disproportionately benefit higher-income individuals who are more likely to have HSAs.
Constitutional Alignment
The bill appears to align with the general welfare clause of the Constitution (Preamble), as it aims to ease the financial burden on families during a difficult time. Congress has broad authority to tax and spend for the general welfare (Article I, Section 8). The bill does not appear to infringe on any specific constitutional rights or limitations.
However, some might argue that tax-related provisions should be uniformly applied across states, although this bill doesn't inherently violate that principle. The bill's focus on tax policy falls under the purview of Congress's enumerated powers.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).