Freedom for Families ActThis bill allows individuals to establish and contribute to a health savings account (HSA) without being enrolled in a high-deductible health plan (HDHP), increases HSA contribution limits, and allows tax-free distributions from an HSA during a period of qualified caregiving.Under current law, individuals may establish and contribute to an HSA if they are covered under an HSA-eligible HDHP. For 2025, HSA contributions are limited to $4,300 for self-only coverage or $8,550 for family coverage (adjusted annually). Individuals who are at least 55 years old may make an additional HSA contribution of up to $1,000 per year. Further, under current law, HSA distributions are tax-free if used to pay for qualified medical expenses. The bill eliminates the HDHP coverage requirement for purposes of an HSA.The bill also increases the HSA annual contribution limit to $9,000 for individuals or $18,000 for joint filers (adjusted annually) and eliminates the additional contribution for individuals who are at least 55 years old.Finally, the bill excludes HSA distributions during a period of qualified caregiving from gross income. The bill defines period of qualified caregiving as any period during which an individual is on leave or not employed due tothe birth or adoption of a child;placement of a foster child;caring for a family member with a serious health condition;an inability to work due to a serious health condition; orcertain emergencies related to a spouse, child, or parent on covered active duty with the Armed Forces.
The proposed changes would modify existing regulations by permitting individuals to withdraw funds from their HSAs without facing tax liabilities if those funds are used to cover medical expenses or caregiving-related costs during periods of qualified leave. Additionally, the bill eliminates the requirement for individuals to be enrolled in a high-deductible health plan to contribute to an HSA, potentially broadening access to these accounts for more families and caregivers. Overall, this legislation is designed to improve the financial security of families managing health-related crises.
House Bill 74, titled the 'Freedom for Families Act,' proposes amendments to the Internal Revenue Code of 1986, specifically aimed at enhancing flexibility in the use of health savings accounts (HSAs) during family or medical leave. The bill allows for tax-advantaged distributions from HSAs to cover costs during periods of caregiving, thereby providing financial support to individuals who may be temporarily out of work due to personal or family health issues. This adjustment seeks to alleviate some financial stress on families during crucial times of need.
While proponents argue that this bill will provide necessary support to caregivers and families, critics may express concerns about the fiscal implications of increased withdrawals without corresponding checks on spending. The essence of the debate revolves around balancing the need for aid during family health crises and ensuring the financial sustainability of HSAs as a useful tool for health care savings. As this bill moves through the legislative process, discussions around its budgetary impacts and potential reach will likely dominate the conversation.