The HSAs For Heroes Act would expand health savings account eligibility to veterans who are eligible for veterans benefits, even if they don’t have a service-connected disability, effective for tax years beginning after 2025. It also adds a new rule allowing tax-free HSA distributions during periods of caregiving and defines that caregiving period by reference to the Family and Medical Leave Act.
In addition, the bill relaxes the HDHP requirement for HSA eligibility and increases the annual contribution limit, with accompanying regulatory and reporting provisions. The combination of expanded access, new caregiving provisions, and a higher cap aims to broaden healthcare flexibility for veterans and their families while requiring careful oversight and budgeting.
At a Glance
What It Does
The bill expands HSA eligibility to veterans eligible for VA benefits (even without a service-connected disability), permits caregiving-related distributions to be tax-free, removes the HDHP requirement for eligibility, and raises the contribution limit. It also adds coordinating provisions with veterans benefits and requires Treasury guidance and reporting.
Who It Affects
Veterans eligible for VA benefits, their families, HSA custodians and administrators, employers offering HSAs, and tax filers with HSAs.
Why It Matters
This marks a substantive shift in who can contribute to HSAs and how funds can be used during caregiving, potentially increasing out-of-pocket healthcare flexibility for veterans while altering federal revenue and oversight dynamics.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
The bill rewrites parts of the Internal Revenue Code to expand who can contribute to Health Savings Accounts. Specifically, it removes the requirement that only individuals with service-connected disabilities may contribute, expanding eligibility to veterans who are eligible for veterans benefits, including those without a service-connected disability.
The effective date is after December 31, 2025, and the amendments coordinate with veteran benefits to avoid duplicative coverage. In addition, the bill introduces new rules on how HSA funds can be used during caregiving periods, allowing tax-free distributions when used for qualified medical expenses or during periods of qualified caregiving under the Family and Medical Leave Act framework.
It also eliminates the no-HDHP requirement for eligibility and increases the HSA contribution limit, with a higher cap for joint filers. The act directs Treasury to issue regulations and guidance to implement these changes and to report on usage, fraud, and program performance to Congress, while establishing a budgetary offset framework via the CBO.
The technical amendments touch several code sections to harmonize the expanded eligibility with existing HSA provisions (including 223(c), 223(f), and 223(b)), and to align with carryover rules, impact on gross income, and the treatment of distributions. The combination of broader eligibility, caregiving flexibility, and larger contribution room could influence veteran healthcare planning, out-of-pocket costs, and how HSAs intersect with VA benefit programs.
The bill anticipates regulatory guardrails to prevent abuse and duplication of benefits and imposes reporting requirements to monitor effectiveness and fiscal impact.
The Five Things You Need to Know
The bill expands HSA eligibility to veterans eligible for VA benefits, removing the service-connected disability requirement.
Contribution limits are raised to $9,000 for individuals and $18,000 for joint filers, with changes effective for months in tax years beginning after enactment.
A new "period of qualified caregiving" definition ties caregiving leaves (per FMLA) to HSA distribution rules.
HDHP eligibility requirements for HSAs are removed, broadening the pool of eligible individuals.
Treasury/IRS regulations and annual congressional reporting are mandated to implement and monitor the amendments, including fraud and duplication safeguards.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Eligibility expansion for veterans to contribute to HSAs
Section 2 amends 223(c)(1)(C) to remove the disability-based eligibility trigger and to allow individuals who are eligible for veterans benefits—even without a service-connected disability—to contribute to HSAs. It also specifies that this expansion applies to taxable years beginning after December 31, 2025. The section includes a coordination clause to ensure that veterans benefits are not reduced or duplicated by HSA participation, preserving the integrity of both programs.
Distributions during caregiving
Section 3 broadens the tax treatment of HSA distributions during caregiving by modifying 223(f). It creates a tax-free pathway for amounts used for qualified medical expenses as well as distributions made during a period of qualified caregiving, while ensuring that distributions not used for these purposes remain taxable. It also defines the mechanics of what constitutes a period of qualified caregiving, tying it to leave or non-employment arising from FMLA-eligible caregiving situations.
No HDHP requirement; higher contribution limits
Section 4 removes the HDHP requirement from HSA eligibility and adjusts the contribution limits. It raises the annual limit to $9,000 for individuals (and doubles for joint returns) and realigns related subsections to reflect the new cap. The subsection amendments also harmonize related definitions and ceiling levels across 223(b), 223(d), and related provisions to maintain consistency with the new limits.
Regulatory authority and reporting
Section 5 assigns regulatory authority to the Treasury, in consultation with the Veterans Affairs Department, to issue rules and guidance necessary to implement the amendments, including anti-abuse and duplication safeguards and documentation requirements. It requires an annual congressional report detailing the number of eligible veterans contributing to HSAs, aggregate contributions and distributions, device/treatment categories financed, and any implementation issues with recommended improvements.
Budgetary effects and revenue offset
Section 6 directs Treasury to estimate revenue effects of the amendments and to provide the estimates to the CBO within six months of enactment. This creates a formal budgetary assessment accompanying the policy changes and establishes the basis for fiscal planning and oversight.
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Eligible veterans: Veterans who are eligible for VA benefits (including those without a service-connected disability) gain access to contribute to HSAs, improving flexibility for healthcare financing.
- Married couples filing jointly: The higher HSA contribution cap benefits households using joint returns, enabling larger tax-advantaged savings for healthcare and caregiving costs.
- HSA custodians and financial institutions: With a broader pool of contributors and more complex distributions (including caregiving), custodians may see increased activity and product usage.
- Employers offering HSAs: Employers that sponsor HSAs could experience greater participation and require updated plan administration to accommodate the expanded rules.
- Policy researchers and Congress: The added reporting framework produces data to assess the program’s impact on veterans’ healthcare savings and fiscal outcomes.
Who Bears the Cost
- Treasury/IRS implementation and enforcement costs: New regulations, guidance, and anti-abuse measures require administrative resources.
- Taxpayers and the federal budget: Revenue effects from the expanded eligibility and higher contribution limits will be a subject of estimate and potential offset considerations under budgetary rules.
- HSAs administrators and employers: Compliance with the new rules and reporting requirements may entail administrative costs and system updates.
- Potential for program complexity and abuse: The caregiving provisions and broader eligibility introduce new vectors for oversight and potential misuse, necessitating robust monitoring and enforcement.
Key Issues
The Core Tension
The central dilemma is balancing expanded veteran access and caregiving flexibility with fiscal responsibility and program integrity. The policy aims to enhance healthcare financing options for veterans while risking increased complexity, potential misuse, and revenue impact; the resolution depends on effective regulatory design and rigorous oversight.
The bill introduces meaningful access expansion for veterans through HSA contributions, but this comes with several policy tensions. Expanding eligibility increases the potential tax expenditure in exchange for broader veteran healthcare flexibility, which will require careful budgeting and revenue estimation.
The caregiving provisions tie HSA tax treatment to FMLA leave, a linkage that raises questions about verification, documentation, and the risk of gaming the system—especially in workplaces with complex caregiving arrangements. There is also a tension between coordinating with VA benefits and ensuring there is no duplication or fraud; the bill acknowledges this by requiring reporting and regulatory guardrails, but the practical enforcement of these restrictions will depend on the quality of notices, audits, and data collection in the regulations to be issued by the Treasury in consultation with the VA.
Another tension lies in removing the high-deductible requirement for HSA eligibility and simultaneously increasing contribution limits. While the policy intent is to broaden access and increase flexibility, it also expands the potential for higher federal revenue exposure if more tax-advantaged savings are accumulated and drawn upon.
This places a premium on robust administration, clear definitions of qualified medical expenses and caregiving costs, and timely reporting to Congress to monitor real-world impact and to adjust policy as needed.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.