• Luther, age 54, and Lexi, age 56, are married and file a joint return. • Lexi has family coverage through her High Deductible Health Plan (HDHP) at work. In 2023, Lexi contributed $2,350 to her Health Savings Account (HSA). Luther made contributions totaling $3,000 to his HSA in 2023. • Luther's Form 1099-SA shows a distribution from his HSA of $3,000. They have receipts showing they paid: o $300 for new eyeglasses for Lexi, o $2,200 in copays for doctor visits and tests, o $400 for over the counter medication, and o $100 for Personal Protective Equipment (PPE) to prevent the spread of COVID-19 and home COVID-19 tests • In April 2023, Luther was diagnosed by his physician with a terminal illness. In May, Luther and Lexi decided to take a luxury vacation before his health deteriorated. They used a distribution from Luther's IRA to pay for it. They received a Form 1099-R showing $15,000 in Box 1, and code 1 in Box 7. • Lexi sold a used handbag on an online marketplace. She received a Form 1099-K reporting the $700 sale. She originally paid $1,000 for the bag. • Luther and Lexi are U.S. citizens with valid Social Security numbers. 7. Of Luther's Form 1099-SA amount, $100 is taxable because PPE is not a qualified expense for 2023? True or False?
False. The IRS guidance during the COVID-19 pandemic included provisions that allowed for the purchase of personal protective equipment (PPE) such as masks, hand sanitizer, and sanitizing wipes to be considered as qualified medical expenses for the purposes of Health Savings Accounts (HSAs), Flexible Spending Arrangements (FSAs), and Health Reimbursement Arrangements (HRAs). This means that if Luther and Lexi used HSA funds to pay for PPE to prevent the spread of COVID-19, as well as for home COVID-19 tests, these expenses would be considered qualified medical expenses and therefore not taxable. As long as the $3,000 distribution from Luther's HSA was used exclusively for qualified medical expenses (which include the eyeglasses, copays for doctor visits and tests, over-the-counter medication, and PPE), the entire distribution would be tax-free. Therefore, the statement that $100 of Luther's Form 1099-SA amount is taxable because PPE is not a qualified expense for 2023 is false.
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