A Health Savings Account (HSA) is a tax-advantaged medical savings account – contributed to by an employer, but owned by the individual. Millions of Americans use their HSAs every day to purchase medical goods and services they need to keep themselves and their families healthy, but ObamaCare could wipe them out altogether.
Thanks to our friends at the House Republican Conference, we learn the Joint Committee on Taxation (JCT) estimates people who use their HSAs, FSAs, or HRAs to pay for over-the-counter drugs will pay an additional $5 billion in taxes under ObamaCare. Get your pen and paper ready. The following items make up a partial list of medications and health care items that will become taxable withdrawals beginning January 1, 2011:
- Baby Aspirin
- Children's Cough Syrup
- Band-Aids
- Cold and chest relief
- Antibiotic ointment and first aid creams
- Anti-flu medication
- Pain relievers
- Cough drops
- Throat lozenges
- Antacids
- Sinus medications
- Allergy medications
- Nasal Sprays
- Smoking cessation aids
- First Aid Creams
- Pedialyte
- Calamine lotion
- Sleep Aids
- Motion sickness pills
- Contact lens solution
In addition to these items, HSAs will be subject to a 20% penalty tax on nonmedical early withdrawals. JCT estimates this new tax, larger than the tax on IRAs and 401(k)s, will cost families an additional $1.4 billion of their own money.
HSAs are vitally important tools to consumers, but will unavoidably suffer a severe blow come January 1. We hope Congress will do everything they can to protect one of the few (remaining) popular, free-market solutions to our health care challenges.