On March 26, 2021, the Internal Revenue Service clarified, that purchases of PPE, such as face masks, hand sanitizer and sanitizing wipes, used for the primary purpose of preventing the spread of coronavirus are deductible from income for tax purposes (provided that the taxpayer’s total medical expenses exceed 7.5 percent of their adjusted gross income).
Additionally, the amounts paid for PPE (as tax-deductible expenses), are also eligible to be paid or reimbursed under health flexible spending accounts (health FSAs), health savings accounts (HSAs) or health reimbursement arrangements (HRAs). That said, if an amount is paid or reimbursed under a health FSA, HSA, HRA or any other health plan, it is not deductible for tax purposes.
- Because at the onset of the pandemic, many products recommended by the U.S. Centers for Disease Control and Prevention to use to combat the spread of COVID-19 were not widely eligible for purchase with FSA or HSA funds, the new change is not tied to a state of emergency, rather is a permanent change to eligibility.
- Health FSAs and HRAs may be amended (retroactive to Jan. 1, 2020 or any period beginning afterward), as long as the amendment is in place before the end of the calendar year following the year for which the change is effective.
- Pharmacies and retailers must update their software systems to show that PPE products are now eligible for payment through tax-advantaged benefit accounts.
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The information contained in this article is intended for educational purposes and to provide a general understanding of regulatory events, legislative changes and the law – not to provide specific legal or tax advice.