Travel expense reimbursement for abortion, medical care could be taxable

With several states recently passing legislation restricting access to abortion services, some of your peers have been mulling over paying for medical care travel expenses that employees and their dependents incur because the services they seek are unavailable in their area.

If your company’s considering such a travel expense program, be aware that payments/reimbursements could be considered taxable. So it’ll be crucial for Payroll and Accounting to ensure these benefits are properly reported and taxed.

For example, if you implement a non-accountable stipend program, the full amount of travel benefits would be taxable to the employee/dependent and can be included on the employee’s Form W-2.

The Internal Revenue Code bottom line: In order to be tax-deductible, travel for medical care must be essential for obtaining legal services from a doctor in a licensed hospital or an equivalent facility.

Note that the Internal Revenue Code has some limitations regarding:

• transportation to a medical facility. Deductible medical care transportation costs include taxi, rideshare, bus and train fares, as well as airfare and rental car fees. For personal vehicle use, the standard mileage rate/actual operating expense applies, and
• lodging and meals while traveling to get medical care. While meals are not deductible, lodging costs of up to $50 per night, per person (including an essential travel companion) are deductible.

If reimbursed expenses go beyond those parameters, the excess amount is taxable to the employee and/or dependent.

Medical care travel coverage options

You may want to ask your plan administrator if your group health plan can offer employees travel reimbursements for medical care. Be aware that due to several federal regs, including the Affordable Care Act and ERISA, a medical travel benefit would need to be part of either a major medical plan or an excepted benefit like an employee assistance program.

To avoid compliance headaches, consider designing a general travel reimbursement program with benefits not specifically defined as medical care. For instance, some employers have a program that provides employees a travel stipend with minimal substantiation requirements for approved travel expenses. You’ll want to huddle up with your legal team to check if this is feasible, based on any applicable laws.