In a recent update, the IRS has made significant changes to its guidelines surrounding tax-deductible medical expenses and high deductible health plan (HDHP) preventative care benefits. These updates, which were announced on Thursday through two notices (Notice 2024-71 and Notice 2024-75), aim to broaden the scope of what qualifies as medical care and preventive care under specific tax and health plan regulations.
IRS Lists Condoms as Deductible Medical Expenses
Under Notice 2024-71, the IRS has confirmed that amounts paid for condoms will now be considered tax-deductible medical expenses. This means that taxpayers who purchase condoms can deduct the cost as a medical care expense, provided they meet the other requirements of Section 213 of the Internal Revenue Code.
Typically, Section 213 allows individuals to deduct unreimbursed medical care expenses that exceed 7.5% of their adjusted gross income. In addition to being deductible, the costs associated with condoms are also eligible for reimbursement through tax-advantaged health spending accounts like a Health Flexible Spending Account (FSA), Archer Medical Savings Account (MSA), Health Reimbursement Arrangement (HRA), or Health Savings Account (HSA). However, taxpayers should note that they cannot “double-dip” – if the expense is paid or reimbursed through these accounts, it cannot be deducted again.
Expanded Preventive Care Benefits for HDHPs
The IRS has also expanded the list of preventive care benefits that can be provided by a High Deductible Health Plan (HDHP) without charging a deductible. Notice 2024-75 includes the following additions to the list of preventive care benefits:
- Over-the-counter oral contraceptives, including emergency contraceptives
- Male condoms
This means that individuals enrolled in HDHPs can receive these items as part of their preventive care coverage without meeting the plan’s deductible requirements. The expansion aligns with the IRS’s ongoing efforts to enhance access to preventive health services.
Additional Preventive Care Clarifications
Notice 2024-75 also provides clarifications on other preventive care items that can be covered by HDHPs, even when they would typically be subject to a deductible. These include:
Breast cancer screenings: All types of breast cancer screenings for individuals who have not been diagnosed with breast cancer are now classified as preventive care.
- Continuous glucose monitors: For individuals diagnosed with diabetes, continuous glucose monitors are now considered preventive care.
- Insulin products: The safe harbor rule for insulin products applies not only to insulin used to treat diagnosed diabetes but also to insulin prescribed to prevent complications or exacerbation of diabetes.
Understanding the Impact
These changes are designed to reduce barriers to critical preventive care and make it easier for taxpayers to manage and afford medical expenses. For those with HDHPs, the ability to receive certain preventive care services, including contraceptives and diabetes management tools, without meeting a deductible could have a significant financial impact.
The IRS’s expansion of deductible medical expenses and preventive care benefits is part of a broader effort to make healthcare more accessible and affordable. Taxpayers should review the IRS’s notices and consult with their healthcare providers to better understand how these new guidelines could benefit their health and finances.
These updates represent a positive step forward in the evolving landscape of healthcare policy, especially for individuals seeking preventive care and those managing ongoing medical conditions.
For more information, please contact Martin D. Hauptman at (973) 243-7912 or via email at mhauptman@mblawfirm.com