New IRS guidance allows tax deductions for contraceptives and more accessible preventive care options through High Deductible Health Plans (HDHPs).
The IRS has announced important updates to what qualifies as deductible medical expenses and what preventive care benefits can be covered by High Deductible Health Plans (HDHPs) without requiring a deductible. Released in Notices 2024-71 and 2024-75, these updates expand coverage and clarify common medical expenses, making healthcare more affordable for taxpayers.
New Deductible Medical Expense: Contraceptives
One key change from the IRS affects deductible medical expenses under Section 213 of the Internal Revenue Code. In Notice 2024-71, the IRS now classifies condoms as medical expenses, which makes them eligible for tax deductions. This means that if you purchase condoms, you may be able to deduct these expenses as part of your medical care, provided they meet other requirements under Code Section 213.
Here’s how it works: Code Section 213 lets taxpayers deduct certain unreimbursed medical expenses that exceed 7.5% of their adjusted gross income (AGI). Condoms now qualify as deductible if they meet this threshold, making contraceptive costs potentially more manageable for taxpayers.
Additionally, contraceptive expenses can be paid or reimbursed through health spending arrangements, such as:
- Health Flexible Spending Arrangements (FSAs)
- Archer Medical Savings Accounts (MSAs)
- Health Reimbursement Arrangements (HRAs)
- Health Savings Accounts (HSAs)
However, it’s important to note that “double-dipping” isn’t allowed. If you receive reimbursement through one of these accounts for an expense, you can’t also claim it as a deduction on your taxes.
Expanded Preventive Care Benefits for HDHPs
The IRS also introduced Notice 2024-75, which adds several preventive care services that HDHPs can cover without requiring a deductible. This change allows patients to access critical preventive services and products without out-of-pocket costs, even if they haven’t yet met their annual deductible. Here’s what’s included in this expanded list of preventive care:
Oral Contraceptives and Male Condoms
For the first time, over-the-counter oral contraceptives, including emergency contraception, and male condoms are included in the list of preventive care benefits. This expansion offers significant cost savings to individuals who rely on these items regularly. It also supports broader access to essential reproductive health resources by removing financial barriers.
Breast Cancer Screenings
Under the new guidelines, all types of breast cancer screenings qualify as preventive care for individuals who have not been diagnosed with breast cancer. This means that various screening options are covered without needing to meet a deductible, which could encourage more individuals to undergo regular screenings and detect potential issues early.
Continuous Glucose Monitors for Diabetics
The IRS now recognizes continuous glucose monitors as preventive care for those diagnosed with diabetes. These devices can be essential for diabetic patients to track glucose levels and manage their condition effectively. With this designation, individuals using continuous glucose monitors may find it easier to access them without waiting to meet a deductible.
Insulin Products for Diabetes Management and Prevention
Insulin products are also classified as preventive care. Regardless of whether they’re prescribed for direct diabetes management or to prevent diabetes complications. This change removes out-of-pocket costs for an essential medication, helping diabetics manage their condition affordably.
How These Changes Affect HDHPs and Taxpayers
These IRS updates make HDHPs more beneficial for members. Traditionally, HDHPs require people to meet a high deductible before covering most services. However, with these new rules, HDHPs can cover essential preventive services and items right away. This change could encourage more people to seek preventive care earlier.
HDHPs have lower premiums but higher deductibles. With this IRS guidance, people can access necessary care sooner and more affordably. For instance, if you use insulin, need a breast cancer screening, or rely on contraceptives, you may get those covered without meeting a deductible. These updates reduce the need for out-of-pocket payments, making it easier to prioritize preventive care.
Why This Matters for Healthcare Access
HDHPs are popular for their lower premiums but typically have higher deductibles. With these changes, HDHPs can offer broader preventive care coverage without requiring members to meet their deductible first. This provides immediate access to preventive services, which is one of the key goals of these plans.
By allowing more items and services to qualify as preventive, the IRS aims to support people’s health while reducing their financial burden. Patients can access essential preventive care sooner and potentially avoid higher costs down the road. For example, diabetic patients can get insulin and glucose monitors, and those seeking contraceptives can now do so without paying out-of-pocket first. These changes reflect a push toward making preventive care easier and more affordable.
Final Thoughts
The IRS’s new rules on deductible medical expenses and preventive care expand access to essential health services. By making items like contraceptives deductible and classifying more services as preventive, these updates help reduce out-of-pocket costs. For taxpayers using HDHPs or health spending accounts, this guidance offers new ways to save on healthcare.
If you have an HDHP, check what’s covered under these new rules. This guidance could make a big difference in managing healthcare costs while focusing on preventive care.
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