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.

The bill, titled "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," proposes changes to the tax treatment of certain distributions from Health Savings Accounts (HSAs). Here’s a breakdown of what the bill entails:

Healthcare Savings Accounts (HSAs)

Health Savings Accounts allow individuals to save money tax-free for medical expenses. Currently, distributions from these accounts can cover specific health-related costs without incurring taxes, but not all expenses are treated equally.

Proposed Amendments

The bill specifically proposes the following amendments:

• Inclusion of Funeral Expenses: The bill will amend Section 223(d)(2) of the Internal Revenue Code to include funeral expenses among the qualified distributions from HSAs. This means that funds withdrawn from HSAs to pay for funeral-related costs will not be taxed.
• Definition of Funeral Expenses: The bill defines "funeral expenses" to include various costs associated with the care and disposition of an individual’s remains, which encompasses:
• Burial or cremation costs
• Embalming and preparation fees
• Casket or urn purchase
• Transport of remains
• Funeral director and venue services
• Grave digging and plot costs
• Limit on Qualified Distributions: It sets a cap of $5,000 on the total amount that can be used for funeral expenses per account beneficiary from HSAs.
• Timing for Expense Recognition: The bill includes a provision that allows funeral expenses incurred within 90 days of the account beneficiary's death to be treated as if they were incurred immediately prior to death. This aims to facilitate the timely management of expenses following a passing.

Effective Date

The changes proposed in the bill would be effective for any amounts paid after the enactment of the legislation in taxable years ending after that date.

Relevant Companies

None found.