Another Obamacare tax on the middle class bites the dust
In a win for over 26 million Americans with a Health Savings Account (HSA) and the 35 million with a Flexible Spending Account (FSA), the Coronavirus Aid, Relief, and Economic Security (CARES) Act repeals Obamacare’s onerous Medicine Cabinet Tax.
The Obamacare Medicine Cabinet Tax prohibits Americans from using HSAs or FSAs to purchase thousands of over the counter medicines like cold and flu drugs, allergy medication, children’s fever relievers, and menstrual cramp relief medication. Under the tax, only prescription medicines qualified as an HSA/FSA expense.
The CARES Act strikes the last sentence of sub-paragraph A of Sec. 223(d)(2) in the tax code to remove this restriction.
Upon President Trump’s signature, Americans will be able to purchase thousands of over the counter medical products using pre-tax dollars, a big help for cash-strapped households.
The bill also allows Americans to use pre-tax dollars for the purchase of menstrual products, defined as a “tampon, pad, liner, cup, sponge, or similar product used by individuals with respect to menstruation or other genital-tract secretions.”
HSAs are tax-advantaged savings accounts that individuals can use to pay for qualified medical expenses. Since they were created in 2004, HSAs have become a popular and successful vehicle for individuals to spend and save their own money for a wide array of healthcare needs.
FSAs are employer-sponsored accounts that individuals can use to pay for medical expenses.
The Medicine Cabinet Tax was one of the many Obamacare tax increases on the middle class and a violation of the Obama-Biden pledge not to raise any tax on any American making less than $250,000 per year.
By forcing Americans with FSAs and HSAs to use post-tax dollars to purchase these necessary items, Obamacare raised taxes on these households by $8.5 billion over a ten year period.
By repealing Obamacare’s costly and onerous Medicine Cabinet Tax, the CARES Act provides important flexibility and tax relief for middle-class Americans that use HSAs or FSAs to pay for medical expenses.