Congress lets HSA holders tap retirement savings tax-free for funerals

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.
• Families with HSAs gain a modest financial advantage over those without HSAs when paying funeral costs, potentially widening the wealth-based gap in end-of-life expense management.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

HSA holders gain a tax-advantaged way to set aside money for a predictable, necessary expense (funeral costs), reducing the tax burden on families managing end-of-life expenses. The $5,000 cap is reasonable and prevents abuse. No restrictions on citizens' rights or protections are imposed.

Who stands to gain

• HSA account holders
• funeral service providers (modest indirect benefit from increased HSA-funded demand)

Named in the bill

Internal Revenue Code Section 223, Health Savings Accounts (HSAs), Funeral service industry

Where it stands

11 cosponsors: 9 Republicans, 2 Democrats.

• Mar 27, 2025 — Introduced · Congress.gov: “Introduced in House”
• Mar 27, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

3 lobbying clients named this bill on 5 disclosure filings across 2 quarters, Dec 2025 to Jun 2026. Those filings disclosed $170,000 in lobbying spend. A filing names 4 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 61% of bills with at least one filing.

Kevin Hern, the sponsor, reported $2,075,651 in PAC receipts in the 2026 cycle.

• National Funeral Directors Assn — $100,000 on 2 filings
• National Funeral Directors Association — $60,000 on 2 filings
• International Cemetery, Cremation and Funeral Association — $10,000 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.