A Medical Savings Account (MSA) is a tax-advantaged account that lets you pay qualified medical expenses with pre-tax dollars. MSAs are available to people who are covered by a High Deductible Health Plan (HDHP) and meet specific eligibility requirements.
Money in an MSA can be used to pay for eligible healthcare costs, such as doctor visits, prescriptions, and other qualified medical expenses. Because contributions and distributions may receive favorable tax treatment, an MSA can help reduce your overall healthcare costs.
MSA Tax Forms
If you took money out of your MSA during the tax year, you'll typically receive 1099-SA Form, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. This form reports the total amount distributed from your account and is used when preparing your tax return.
You'll need the information from Form 1099-SA to determine:
- How much was withdrawn from your MSA
- Whether the distribution was used for qualified medical expenses
- If any portion of the distribution may be taxable
Why Form 1099-SA Matters
The IRS requires MSA distributions to be reported on your tax return. If you used the funds for qualified medical expenses, the distribution is generally tax-free. However, amounts not used for qualified expenses may be subject to income tax and additional penalties.
When you prepare your return, be sure to keep records of your medical expenses in case the IRS requests documentation.
Related Information
If you contributed to or received distributions from an MSA during the year, you may also receive other tax forms, such as Form 5498-SA, which reports contributions made to your account.