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119-hr-6183119th CongressWALLET

To amend the Internal Revenue Code of 1986 to reform certain rules related to health savings accounts.

Sponsored By: Representative Doggett, Lloyd [D-TX-37]

Introduced

Summary

This bill would tighten HSA tax and usage rules, including income-based limits on contributions, stricter proof requirements for reimbursements, and new fees and reporting for trustees. It focuses on who can get full HSA tax benefits and what counts as a qualified medical expense under the Internal Revenue Code.

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  • Families and patients: Would narrow eligible HSA spending by excluding spa and beauty treatments and exercise equipment purchases over $500 in a year. Reimbursements would have to be claimed within two years of the original expense.
  • Workers and taxpayers: Would phase out the HSA contribution deduction based on modified adjusted gross income (MAGI), with thresholds such as $300,000 for joint filers and $200,000 for single filers. It would also align certain HSA payments with payroll tax rules.
  • Trustees, administrators, and regulators: Would create an excise tax on excessive HSA fees, require annual trustee reporting on fee categories and totals, and force HSAs to disclose average cash yields versus the national savings yield.

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Bill Overview

Analyzed Economic Effects

5 provisions identified: 2 benefits, 2 costs, 1 mixed.

HSA deduction phased out for high earners

If enacted, the bill would shrink your HSA contribution deduction once your MAGI passes set thresholds. Thresholds are $300,000 for joint filers, $250,000 for head of household, $150,000 for married filing separately, and $200,000 for single filers. The reduction equals (MAGI minus the threshold) divided by $40,000 times your otherwise allowable HSA deduction (use $20,000 for married filing separately). This would apply to tax years beginning after December 31, 2025.

Stricter HSA proof and timing rules

If enacted, HSA distributions would need proof to be tax-free. A provider's note would count only if there is a bona fide provider–patient relationship and usual medical practice standards are met. Reimbursements must be made within two years of when the medical expense was paid. Spa and beauty costs would not be HSA-qualified, and exercise equipment costs over $500 a year would not qualify. HSA statements would also show your account's average cash yield and a national average. These rules would apply to amounts and reports after December 31, 2025.

Tax rules for nondeductible HSA withdrawals

If enacted, distributions tied to nondeductible HSA contributions would be taxed under the rules in section 72 for tax years after December 31, 2025. The bill would also say excess HSA contributions for excise tax purposes are figured without using the new MAGI-based deduction limit. Together these changes change how some withdrawals and excess contributions are reported and taxed.

HSA payroll-tax exclusion for workers

If enacted, the bill would exclude certain HSA-related payments from wages for FICA and Railroad Retirement tax purposes. It would also let employers treat payments reasonably expected to be excludable as nonwage for withholding. These payroll tax rules would apply to payments made after December 31, 2025.

New tax on excessive HSA fees

If enacted, trustees who charge HSA fees above a Secretary-set "reasonable" amount would owe an excise tax equal to the excess. Trustees would also have to file annual reports listing each fee type, how many fees were charged, and total amounts, with demographic breakdowns. These rules would apply to fees charged after December 31, 2025.

Sponsors & CoSponsors

Sponsor

Doggett, Lloyd [D-TX-37]

TX • D

Cosponsors

  • Rep. Jayapal, Pramila [D-WA-7]

    WA • D

    Sponsored 12/9/2025

Roll Call Votes

No roll call votes available for this bill.

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