The IRS has issued guidance clarifying that the purchase of personal protective equipment for the primary purpose of preventing the spread of coronavirus is tax deductible.
Issued March 26, the new guidance cites items such as masks, hand sanitizer, and sanitizing wipes among the list of eligible items.
The IRS will treat eligible expenditures as amounts paid for medical care under § 213(d) of the Internal Revenue Code.
"Therefore, amounts paid by an individual taxpayer for COVID-19 PPE for use by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent(s) that are not compensated for by insurance or otherwise are deductible under § 213(a) provided that the taxpayer’s total medical expenses exceed 7.5% of adjusted gross income."
PPE expenditures are also eligible to be paid or reimbursed under health flexible spending arrangements, Archer medical savings accounts, health reimbursement arrangements, or health savings accounts.
However, if those accounts are used for reimbursement, then the expenditures are not tax deductible.
The IRS guidance notes that group health plans, including health FSAs and HRAs, may be amended to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after January 1, 2020.
"Any plan amendment will not be treated as causing a failure of any reimbursement to be excludable from income under § 105(b) or as causing a § 125 cafeteria plan to fail to meet the requirements of § 125," the guidance says.
"Group health plans may be amended ... 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 December 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."