If you used a Medical Savings Account (MSA) during the tax year, you'll need to report certain contributions and withdrawals on your tax return. MSAs are tax-advantaged accounts used to pay qualified medical expenses. They're similar to Health Savings Accounts (HSAs), but they're only available through specific types of high-deductible health plans and are less commonly used.
MSA Contributions
Contributions you make to an MSA may be tax-deductible, even if you don't itemize deductions on your return.
If you contributed to an MSA during the tax year, you should receive Form 5498-SA from your account administrator. This form reports contributions made to your account.
To confirm the account is an MSA, look at Box 6 of Form 5498-SA. The Archer MSA or Medicare Advantage (MA) MSA box should be checked.
MSA Withdrawals
The IRS requires you to report any distributions, or withdrawals, taken from your MSA.
If you withdrew money from your account during the tax year, you should receive Form 1099-SA. This form shows the total amount distributed from the account.
To verify the distribution came from an MSA, check Box 5 of Form 1099-SA. The Archer MSA or MA MSA box will be checked.
How MSA Withdrawals Affect Your Taxes
Money withdrawn from an MSA and used for qualified medical expenses is generally tax-free.
However, if you use MSA funds for non-qualified expenses, the distribution may be:
- Included in your taxable income
- Subject to additional IRS penalties
Keeping records of how you used MSA funds can help support your return if questions arise later.