Medical savings account can help Montanans save on state income taxes
MSU Extension emphasizes opening account before end of year
MSU News Service
BOZEMAN – There is good news for Montana taxpayers paying out-of-pocket medical expenses.
A Montana Medical Care Savings Account, or MSA, can aid in paying for those expenses not covered by a health insurance policy or a flexible spending account. And if opened by December 31, an MSA can also lower a participant’s annual Montana income taxes.
Up to $3,000 of a deposit into an MSA, per taxpayer, is deductible from an individual’s 2012 Montana adjusted gross income, but it only pertains to state taxes.
“This tax advantage does not apply to your federal income taxes and should not be confused with the Federal Health Savings Accounts (FHAs),” said Marsha Goetting, MSU Extension family economics specialist.
A Montanan with taxable income over $16,400 could save about $207 in state income taxes by depositing the maximum $3,000 in a Montana MSA.
“It doesn’t matter if you have already paid your 2012 medical bills either by check, credit or debit card,” Goetting said. “You can add up those expenses and make a deposit by Dec. 31 of this year and reimburse yourself from your Montana MSA as late as Jan. 15, 2013.”
MSA owners can reduce their Montana income by the total deposited, not the amount used for medical expenses during the tax year.
“Montana Medical Care Savings Accounts are not like flexible spending accounts where you use it or lose it,” Goetting said. Remaining funds in an MSA are available for future medical expenses, but are not tax deductible,” she added.
A husband and wife who each establish an individual MSA can receive a $6,000 deduction if they file a joint Montana income tax return. They will save about $414 on their state income taxes. Joint accounts for an MSA are not allowed. Only individual accounts are eligible for the Montana MSA deduction.
MSA amounts held in the name of a husband or wife can be used to pay the medical bills of either spouse or their dependent children, Goetting said.
Montana accepts any eligible expenses listed in IRS publication “Medical and Dental Expenses,” on the web at irs.gov/pub/irs-pdf/p502.pdf. Expenses not covered are medical-related bills already covered by a supplemental, primary or self-insured plan.
An MSU Extension MontGuide offers help in understanding who would benefit from a Montana medical care savings account. The free publication MontGuide 199817 HR is available from local MSU County Extension offices or online format the MSU Extension website: msuextension.org/publications/FamilyFinancialManagement/MT199817HR.pdf