Face Masks and Other PPE Treated as Deductible Medical Expenses
April 12, 2021
The IRS has issued a statement stating that personal protective equipment counts as deductible medical expenses.
The Internal Revenue Service has issued Announcement 2021-7, clarifying that amounts paid for certain personal protective equipment (PPE) — such as masks, hand sanitizer and sanitizing wipes — used for the primary purpose of preventing the spread of coronavirus (COVID-19) are deductible medical expenses. These changes are automatically incorporated in § 213(d) of the Internal Revenue Code as eligible expenses.
This announcement allows for amounts paid for COVID-19 PPE to be counted as deductible expenses for the taxpayer if:
- The PPE is not compensated for by insurance or other means
- The total medical expenses exceed 7.5% of adjusted gross income
In addition, amounts paid for COVID-19 PPE, incurred on or after January 1, 2020, qualify to be reimbursed by tax-favored accounts.
COVID-19 PPE and Tax-Favored Accounts
To qualify for reimbursement under a tax-favored account, expenses must be incurred on or after January 1, 2020. These accounts include:
- Health flexible spending accounts (health FSAs)
- Health reimbursement arrangements (HRAs)
- Health savings accounts (HSAs)
HSAs are individually-owned accounts and can automatically reimburse all § 213(d) medical expenses. However, health FSAs and HRAs are types of group health plans set up by employers and, therefore, do not necessarily include all § 213(d) medical expenses.
It is important to note that if an amount is paid or reimbursed under any of the above methods, or any other health plan, it will not be considered a deductible medical expense on an individual’s taxes.
If your plan document currently allows for reimbursement of all medical expenses under § 213(d) of the Internal Revenue Code, then no amendment is necessary. However, if your plan is more descriptive on the types of expenses that are eligible, and you would like to allow for the reimbursement of COVID-19 PPE, an amendment will most likely be required.
Group health plans (including health FSAs and HRAs) may be amended to provide for reimbursement of COVID-19 PPE expenses incurred on or after January 1, 2020. In general, such amendments will need to be adopted by December 31 of the year following the plan year in which the change is effective, i.e. December 31, 2021, for calendar year plans wishing to amend their plans retroactively to January 1, 2020.
Reach out to your Hylant representative for further information.
The above information does not constitute advice. Always contact your employee benefits broker or trusted adviser for insurance-related questions.