The Internal Revenue Service has issued Announcement 2021-7, clarifying that amounts paid for certain personal protective equipment (PPE)—such as masks, hand sanitizer and sanitizing wipes—used for the primary purpose of preventing the spread of coronavirus (COVID-19) are deductible medical expenses.
Therefore, amounts paid for COVID-19 PPE that are not compensated for by insurance or otherwise are deductible, provided that the taxpayer’s total medical expenses exceed 7.5% of adjusted gross income.
Tax-favored Accounts
- Amounts paid for COVID-19 PPE are also eligible to be paid or reimbursed under:
- Health flexible spending arrangements (FSAs)
- Archer medical savings accounts (Archer MSAs)
- Health reimbursement arrangements (HRAs)
- Health savings accounts (HSAs)
However, if an amount is paid or reimbursed under any of the above accounts, or any other health plan, it will not be considered a deductible medical expense.
Plan Amendments
Group health plans (including health FSAs and HRAs) may be amended pursuant to the announcement to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after Jan. 1, 2020, if certain requirements are satisfied.
Plan Amendment Requirements
- The amendment is adopted by the last day of the first calendar year following the plan year in which it is effective;
- The plan is operated consistently with the amendment terms until the amendment is adopted; and
- No amendment with retroactive effect is adopted after Dec. 31, 2022.