Archer Medical Savings Account
An Archer medical savings account (MSA) is a tax-exempt trust or custodial account in which you save money exclusively for future medical expenses. It must be established with a U.S. financial institution.
Contributions to your Archer MSA qualify for a deduction on your tax return, even if you do not itemize deductions.
Contributions and distributions are reported on Form 8853 and attached to your Form 1040.
- You can claim a tax deduction on your 1040, even if you do not itemize deductions.
- Interest and other earnings on the assets in the account are tax-free.
- Distributions are tax-free if used to pay qualified medical expenses.
- Contributions remain in your account year after year until you use them.
- Archer MSA accounts stay with you, even if you change employers or leave the work force.
- You must have a high deductible health plan (HDHP).
- You must have no other health or Medicare coverage.
- You must be either of the following:
- A self-employed person, or the spouse of a self-employed person, who maintains an individual or family HDHP
- Employed by a small employer who maintains an individual or family or HDHP for you or your spouse
Limits on Contributions
- Annual deductible limit:
- You or your employer can contribute up to 65% (75% if family coverage) of the annual deductible of your HDHP.
- Income limit:
- You cannot contribute more than you earned for the entire year from the employer maintaining the HDHP.
- If you are self-employed you cannot contribute more than your net self-employment income.
Limits of Deduction
The deduction is limited based on whether the coverage is for an individual or a family. The 2013 limits are:
- Annual deductible must be at least $2,150 and no more than $3,200.
- Out-of-pocket expenses can be no more than $4,300.
- Annual deductible must be at least $4,300 and no more than $6,450.
- Out-of-pocket expenses can be no more than $7,850.
Qualified Medical Expenses
Qualified medical expenses are the same expenses that qualify for the Medical and Dental Deduction and are incurred by:
- You or your spouse
- All dependents whom you are claiming
- Any person you could have claimed as a dependent except that:
- The person filed a joint return.
- The person had more than $3,900 in gross income.
- You could be claimed by someone else.
You cannot deduct qualified medical expenses as an itemized deduction if the expenses are paid with a tax-free distribution from your Archer MSA.
For more information, see IRS Publication 969.