OBBB offers Healthcare Tax Breaks for Families On July 4, 2025, President Trump signed the One Big Beautiful Bill into law. This sweeping bill enacts major tax cuts, budgetary shifts, and healthcare reforms. Its changes to HSAs, telehealth, and other care structures may carry significant implications for retirees and individuals planning for healthcare costs. Below are some changes we felt were relevant for our clients to be aware of. The bill brought some meaningful updates to two key tax-advantaged accounts: Dependent Care Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). Higher Contribution Limits for Dependent Care FSAs A Dependent Care Flexible Spending Account (Dependent Care FSA) is a type of employer-sponsored benefit that allows employees to set aside pre-tax dollars to pay for eligible dependent care expenses. Effective January 1, 2026, the annual contribution limit for Dependent Care FSAs will increase from $5,000 to $7,500 for joint filers and single individuals, and from $2,500 to $3,750 for married individuals filing separately. The change allows families to set aside more pre-tax dollars for childcare and other dependent care expenses such as care for a spouse or other dependent who is physically or mentally unable to care for themselves. Individuals cannot double-dip by also claiming the same expenses under the Child and Dependent Care Tax Credit, though it is possible to split expenses between the FSA and the credit for maximum benefit. Higher More Ways to Save with HSAs A Health Savings Account (HSA) is a tax-advantaged savings account that can be used to pay for qualified medical expenses. It is only available to individuals who are enrolled in a high-deductible health plan (HDHP). An HSA provides what is referred to as “Triple Tax Benefit” due to pre-tax (through payroll) or tax-deductible contributions, tax-sheltered growth, and tax-free distributions when used for qualified medical expenses. The OBBB broadens HSA eligibility by expanding who can contribute to the account. HSA-qualified high-deductible health plan, as defined by the IRS, will now include Bronze and Catastrophic health plans offered through the ACA Marketplace starting January 1, 2026. Individuals enrolled in either of these plans will now be able to contribute to an HSA. 
New Flexibility for Direct Primary Care The bill also expands on eligible expenses HSA funds can be used towards. Now HSA funds can be used for Direct Primary Care (DPC) arrangements. DPCs typically follow the model of a monthly fee, which covers office visits prior to meeting the HDHP deductible. With the OBBB changes, these monthly fees now are eligible HSA expenses if they do not exceed $150/month for an individual or $300/month for families. Telehealth Coverage Here to Stay The OBBB makes permanent the temporary COVID-era provision that allows high-deductible health plans to cover telehealth and other remote care services before the deductible is met. If the HDHP offers telehealth services at no cost or minimal cost before the deductible, the plan participant can still contribute to their HSA without issue. This was retroactively added to plan years beginning on or after January 1, 2025. Watch Out for Expiring Subsidies While the new bill has introduced new opportunities, it has also created potential issues for individuals not covered by an employer plan and not yet eligible for Medicare, specifically the expiration of the enhanced subsidy for ACA plans. For the first several years after the health insurance Marketplace debuted in 2014, the premium subsidy (premium tax credit) eligibility range was capped at household incomes of 400% of the federal poverty level. People with incomes above 400% of FPL would not receive any assistance when it came to paying for health insurance. The enhanced subsidies, introduced by the American Rescue Plan in 2021 and extended by the Inflation Reduction Act in 2022, are set to lapse after 2025. These subsidies currently cap benchmark plan premiums at 8.5% of income and allow eligibility for individuals earning above 400% of the FPL. Once expired, many will face substantially higher out-of-pocket premiums. The OBBB does not renew these enhanced subsidies, meaning unless Congress acts, the path to more affordable premiums will close at the end of 2025. Tax Considerations for Early Retirees For 2026 open enrollment, ACA Bronze/Catastrophic plan combined with HSA can be a tax-efficient pairing for early retirees not yet on Medicare, especially when coordinated with taxable account withdrawals or Roth IRAs. A person who is facing the loss of all subsidies in 2026 might find that by contributing to an HSA, they can bring their Modified Adjusted Gross Income (MAGI) into the subsidy eligible range. Financial Planning can help you turn the Changes into Opportunities The One Big Beautiful Bill reshapes the way individuals can approach healthcare planning. These shifts underscore the importance of integrating healthcare strategies with overall wealth management. It is important to discuss how these changes could impact you specifically with a financial planner or accountant. Working closely with a financial advisor may help turn these regulatory changes into opportunities while guarding against unexpected costs. | 
