Congress lets HSA holders tap retirement savings tax-free for funerals
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. · Filed by Kevin Hern (R-OK) · 11 cosponsors · Introduced Mar 27, 2025 · Referred to committee
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What it does
This bill allows people to withdraw up to $5,000 tax-free from their health savings accounts (HSAs) to pay for funeral expenses after death. Currently, HSA withdrawals for funeral costs are taxed as regular income; this bill treats them as 'qualified distributions,' meaning they avoid the 20% penalty and income tax that normally apply to non-medical HSA withdrawals. The change applies to funeral expenses paid within 90 days after the account holder's death.
Why we flagged it
The bill is a narrow, technical amendment to the Internal Revenue Code that expands the definition of qualified HSA distributions to include funeral expenses. It is a straightforward tax policy change with no hidden mechanisms or riders.
What the text implies
- Funeral industry may see modest demand increase as HSA holders become aware of the tax advantage, potentially affecting pricing or service uptake in funeral services.
- The 90-day window for treating funeral expenses as 'incurred before death' creates a narrow but real tax-planning opportunity for estates to coordinate HSA distributions with death timing.
The full analysis lists 3 implications of this text.
Who stands to gain
HSA account holders; funeral service providers (modest indirect benefit from increased HSA-funded demand)