Archer Medical Savings Accounts are similar to Health Savings Accounts in that they allow eligible individuals to save for, and pay, health care expenses on a tax-free basis. An Archer MSA is a tax-exempt trust or custodial account that you set up with a U.S. financial institution, such as a bank or an insurance company, in which you can save money exclusively for future medical expenses. A Medicare MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is eligible for Medicare. Taxpayer must obtain the Medicare MSA designation.
After December 31, 2007, no individual can be considered an eligible individual for Archer MSA purposes unless:
- They were an active participant for any tax year ending before January 1, 2008, or
- They became an active participant for a tax year ending after December 31, 2007, by reason of coverage under a high deductible health plan (HDHP) of an Archer MSA participating employer.
To qualify for an Archer MSA, the participant in the plan must:
- be an employee (or spouse) of a small employer that maintains a self-only or family HDHP for either self or spouse; or
- be a self-employed person (or spouse) who maintains a self-only plan or a family HDHP plan.
CONTRIBUTIONS TO ARCHER MSA:
The taxpayer is not required to itemize deductions in order to claim a deduction for a contributions. Contributions may be made by the taxpayer(spouse), someone else, or an employer. However, the taxpayer and employer cannot contribute to the MSA in the same year. Employer contributions are not tax-deductible, however, contributions by taxpayer or someone else for the benefit of the taxpayer (spouse) may be considered a Deductible contribution for tax purposes on the plan holder's return. If the taxpayer can be claimed as a dependent on another taxpayer return, no deduction for a contribution is allowed. To enter a Medical Savings Account Deduction in the tax program, from the Main Menu of the Tax Return (Form 1040) select:
- Adjustments Menu
- Archers MSAs and Long-Term Care Insurance (8853)
- Section A, Part I
DISTRIBUTIONS:
Distributions from the Archer MSA must be for qualified medical expenses for persons eligible to participate in the plan. Medical expenses incurred by a person that is NOT covered by a HDHP are taxable. Distributions not used to cover unreimbursed qualified medical expenses are subject to an additional 20% tax unless one of the following exceptions applies:
-
- Distributions are made after death of account holder.
- Account holder becomes disabled.
- Account holder turns 65.
To enter distributions:
- Adjustments Menu
- Medical Savings Account Deduction (8853)
- Section A, Part II
Medicare Distributions are entered separately from Archer MSA distributions in
- Section B, Part II
Accelerated death benefits paid by a Life Insurance Policy and Long-term Care Insurance payments, including per diems, and other expenses paid by a Long-term Insurance plan are reported in:
- Section C, Part II
Note: This is a guide to entering the Medical Savings Account Deduction into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information:
IRS: Instructions for completing Form 8853
IRS: Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
