Amounts Paid for Certain Personal Protective Equipment Treated as Medical Expenses

(Parker Tax Publishing April 2021)

The IRS announced that amounts paid for personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of the Coronavirus Disease 2019 (COVID-19 PPE) are treated as amounts paid for medical care under Code Sec. 213(d). Therefore, 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 Code Sec. 213(a), provided that the taxpayer's total medical expenses exceed 7.5 percent of adjusted gross income. Announcement 2021-7.

In Announcement 2021-7, the IRS notified taxpayers that amounts paid for personal protective equipment (PPE), such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of the Coronavirus Disease 2019 (COVID-19 PPE) are treated as amounts paid for medical care under Code Sec. 213(d). Therefore, 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 Code Sec. 213(a) provided that the taxpayer's total medical expenses exceed 7.5 percent of adjusted gross income.

The IRS noted that, because amounts paid for COVID-19 PPE are expenses for medical care under Code Sec. 213(d), the 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). The IRS clarified that if an amount is paid or reimbursed under a health FSA, Archer MSA, HRA, HSA or any other health plan, it is not deductible under Code Sec. 213.

According to the IRS, 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 pursuant to Announcement 2021-7 to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after January 1, 2020. The IRS stated that such an amendment will not be treated as causing a failure of any reimbursement to be excludable from income under Code Sec. 105(b) or as causing a Code Sec. 125 cafeteria plan to fail to meet the requirements of Code Sec. 125. Group health plans may be amended pursuant to Announcement 2021-7 if (1) the amendment is adopted no later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective, (2) no amendment with retroactive effect is adopted after December 31, 2022, and (3) 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.

For a discussion of the deduction for unreimbursed medical expenses, see Parker Tax ¶82,500. For a discussion of health savings accounts and Archer MSAs, see Parker Tax ¶81,100 and ¶81,500, respectively.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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