Is an Idaho MSA Right for You?
Tax Free Medical Expenses with an Idaho medical Savings Account (MSA)
Due to the ever-rising cost of medical care in the U.S., finding a tax-advantaged means of paying (or saving) for an inevitable health care related expense has become a top priority for many Idahoans. Fortunately, the state of Idaho offers Idaho Medical Savings Accounts (MSA) which allow for a number of benefits for all residents of the state. The MSA’s are similar to a standard savings account, and may be opened through any participating financial institution in Idaho for a small fee. Once opened, cash contributions of up to $20,000 per year ($10,000 for a single tax filer) may be made, with every dollar contributed during the course of the year deducted from the account owner’s taxable income at the Idaho state level. This equates to a potential tax savings of up to 6.925% for every dollar contributed.
It is important to note that any distributions from the account must be made to pay for qualifying health costs such as deductibles/co-pays, hospital bills, and Medicare and/or Long-Term Care premiums. Any distributions taken from the account used for non-qualifying expenses prior to the account holder turning 59 1/2 will be taxed, and subject to a penalty (unless the money is redeposited within 30 days). Fortunately, unlike Flexible Spending Accounts (FSA’s) which many taxpayers are familiar with, the Idaho MSA’s are not on a “use it or lose it” system, meaning there is no obligation to spend the balance in the account by year end. The interest earned on contributions is tax-free, making it a powerful tool for both immediate health care expenses, and planning for the future.
Other important features of the Idaho MSA are that the funds may be used to pay for the eligible medical expenses for both the account holder’s spouse, or dependent children should the need arise. The MSA is also unattached to any preexisting insurance, and does not actually necessitate that the account holder has any medical insurance at all. Contributions can also be made by anyone, into any account. Meaning employers, friends, and family members can all contribute to an MSA if they so choose.
If you foresee medical expenses in the near or distant future, an Idaho MSA may be a great option for you, or your family members. If you have any questions, please don’t hesitate to give us a call!
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