The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law in 2020. Its primary goal was to address the economic fallout of the COVID-19 pandemic. However, it also impacted those with health savings accounts (HSAs). Here's how.
Over-the-Counter Medical Products
One of the biggest changes brought on by the CARES Act was the inclusion of OTC medical products in the list of qualified medical expenses. Previously, you could not use an HSA to buy OTC drugs and medically necessary products. Rules from the Affordable Care Act required a prescription for eligible expenses.
However, that changed with the CARES Act. It rolled back those rules, allowing you to use your HSA for everything from over-the-counter pain relievers to bandages. With the HSA tax deduction, this change provides even more ways to save. Maximize your tax savings with HSA tax deductions: visit this website to learn how HSA contributions can reduce your tax liability.
Menstrual Products
In addition to over-the-counter drugs and care products, the CARES Act turns certain menstrual products into qualified expenses. You can now use your HSA to pay for tampons, pads, liners, cups and more.
This change is permanent and applied retroactively to any products purchased after January 1, 2020.
Telehealth Services
COVID-19 saw a dramatic increase in telehealth service offerings. With quarantining rules, providers and clinics adopted telehealth technology to continue offering care to patients. But those services came with additional costs.
The CARES Act changes cost-sharing rules. Before the act took effect, cost-sharing measures were typically applied after a policyholder covered their deductible. The CARES Act allows those with high-deductible health plans and an HSA to get coverage before meeting their plan's deductible.
Were There Any Changes to the Tax Benefits?
Fortunately, the CARES Act did not impact any tax advantages of having an HSA. These accounts come with many unique benefits. When you contribute, you can claim an HSA tax deduction. All interest is also tax-deferred, and the expenses you pay using your HSA are tax-free.
These benefits remain intact, and you can continue using your HSA to save for medical expenses while reducing your taxable income and growing your wealth.
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