Amounts paid for personal protective equipment qualify for medical deduction

By Sally P. Schreiber, J.D.

The IRS said on Friday that amounts paid for personal protective equipment (PPE), including masks, hand sanitizer, and sanitizing wipes, for the primary purpose of preventing the spread of COVID-19 can be treated as amounts paid for medical care under Sec. 213(d) (Announcement 2021-7). As a result, amounts paid by an individual taxpayer for COVID-19 PPE for use by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependents that are not compensated for by insurance or otherwise are deductible under Sec. 213(a) if the taxpayer’s total medical expenses exceed 7.5% of adjusted gross income.

These amounts are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs). But if an amount is paid or reimbursed under a health FSA, Archer MSA, HRA, HSA, or any other health plan, it is not also deductible under Sec. 213.

Group health plans, including health FSAs and HRAs, under the terms of which expenses for COVID-19 PPE may not be reimbursed, may be amended under this announcement to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after Jan. 1, 2020, and that amendment will not be treated as causing a failure of any reimbursement to be excludable from income under Sec. 105(b) or as causing a Sec. 125 cafeteria plan to fail to meet the Sec. 125 requirements.

However, a group health plan may only make an amendment under the announcement if the amendment is adopted not later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective, no amendment with retroactive effect is adopted after Dec. 31, 2022, and the plan is operated consistent with the terms of the amendment, including during the period beginning on the effective date of the amendment through the date the amendment is adopted.

Sally P. Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a JofA senior editor.

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