The "Health Out-of-Pocket Expense Act of 2025," or HOPE Act, introduces a new tax-exempt savings vehicle called a HOPE Account. These accounts are designed as trusts exclusively for paying the qualified medical expenses of an account beneficiary. The bill amends the Internal Revenue Code of 1986 to establish the framework for these accounts, which will become effective for taxable years beginning after December 31, 2025.

To be eligible for a HOPE Account, an individual must maintain minimum essential coverage and cannot simultaneously contribute to other health savings arrangements like Health Savings Accounts (HSAs) or Flexible Spending Arrangements (FSAs). Contributions to HOPE Accounts must be in cash and are subject to annual limits, set at $4,000 for self-only coverage and $8,000 for family coverage for heads of household, with cost-of-living adjustments after 2026. While individual contributions are not tax-deductible, certain third-party contributions from employers or state Medicaid programs are permitted, up to 50% of the individual's limit.

For individuals with adjusted gross income below $100,000 ($200,000 for joint filers), these employer or state contributions can be excluded from gross income. Distributions from a HOPE Account are tax-free if used for qualified medical expenses, which align with the definition used for HSAs. Non-qualified distributions are generally prohibited but may be allowed in cases of death or disability, subject to income tax and a 30% additional penalty. The bill also integrates HOPE Accounts into existing tax law by applying rules similar to those for HSAs and IRAs regarding excess contributions, prohibited transactions, and reporting requirements, and employer contributions are treated as employer-provided coverage, subject to comparability rules and an adjusted gross income limit for the employee.