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What is an MSA?Montana MedicalCare SavingsAccounts An account that can beused for paying eligiblemedical expenses that arenot covered by: Health insurance policy Flexible spending planMontGuide199817 HR(FSA) Health Care SavingsAccount (HSA)1Revised March 26, 20192Montana MSA 2019MSA Rules 4,000 Must be separatefrom other accounts Joint accounts forMSAs not allowedmaximumper year 8,000married couple3MSA reduces income forMontana tax purposes Contributions: ReduceMontanaincome byamountcontributed4Tax Savings Depends on yourMontana IncomeTax Bracket561
Tax Brackets & RatesMontana- 2018No Tax Savings At the Federal Level A Montana MSA cannot be used toreduce federalincomeAt LeastBut less Than Then your tax is: 0 3,0001% 3,000 5,2002% 5,200 8,0003% 8,000 10,8004% 10,800 13,9005% 13,900 17,900 17,900 or more6%6.9%7www.revenue.mt.govMT Tax Savings with MSA vs RegularSavings Account Deposit: 4,000Interest earnings Not subject toMontana incometaxation if:Taxable Income more than 17,900 (6.9% tax bracket)SavingsSavings DepositInterest Rate:MSA 4,000x .0002Savings DepositTax Bracket: 4,000x .069Earnings Tax Savings: 8 276 Left in the account Withdrawn for eligiblemedical care expenses9What are eligiblemedical expenses?810Eligible MSAExpenses Montana accepts anyhealth care expenseallowed as a deductionon federal income taxreturn as “eligibleexpenses” Prescribeddrugs Insulin Dental care IRS Publication 50211122
MedicarePart AEligible MSA Expenses Eyeglasses Crutches Hearing Aids Not an eligiblemedical expense Because it was apayroll tax Covered bySocial Security1413MedicareParts B & DWhose medicalexpenses areeligible? Yes, areeligible MSAmedicalexpenses Owner of an account And, anyoneelse!!!!1516Minor ChildParents’ MSAs Cannot establishMSA for: May be used forminor child’seligible medicalexpenses Minor child underage 1817183
Where to establishMSA accounts?Where to establishMSA accounts? Bank Savings Bank Credit Union Trust company Mutual fundcompany Brokerage firm1920MSA & DeathCaution Minimum Balance? Can be used fordeceased’s medicalexpenses for up toa year May range from 20 to 1,000 Fees? 2.50 For monthly withdrawalsthat exceed a certainnumber Example 621MSA & Death22Family Legacy An MSA can beone of YourLegacies Spouse Child Parents23244
POD or TODMSA to:Who can administer myMSA? Non-profits You can Self-administered account Almost all MSAs are selfadministered University ofMontana Foundation Montana State University Someone you payFoundationMontana 4-H Foundation Registered AccountAdministrator2526What if I need money fornon-eligible expenses?Example: Duane Withdraws 6,000 to buy carin July 2019 Considered non-eligiblewithdrawal:Adjusted IncomeMSA WithdrawalTaxable Income Subject to 10% penalty Withdrawal counted asincome in Montana 40,000 6,000 46,000 Unless withdrawn on lastbusiness day of the year27Example: Duanemakes non-eligiblewithdrawalNo 10% Penalty1. If non-eligiblewithdrawal made onlast business weekdayof DecemberIncreased Montana Taxes( 6,000 x 6.9%) 41410% Penalty 600Total Cost of Withdrawal:28 1,01429Amount included asincome, however305
No 10% PenaltyNo 10% Penalty3. Direct transfer toanother MSA withdifferent financialinstitution2. Withdrawal due todeath of accountholder Amount included indecedent’s income inyear died, unlessPOD spouse or linealdescendant Caution, wire transferfees 25 to eachinstitution31No 10% Penalty32Reporting 10% Penalty4. Direct transfer from onetype of savings accountto another within thefinancial institution: Example: MSAsavings account toMSA CD Withdrawals (not foreligible medical careexpenses) Reported Form 2 on page 43433What happens to myMSA when I die?Dept of Revenue Rule Withdrawal formedical expensespaid in prior year Balance passes by: POD Beneficiary Designation Must be made byJanuary 15 Written Will Montana Intestacy Statutes Dying Without a Will35366
Income tax savingsto BeneficiariesWhat if I becomeincapacitated? Funds can be withdrawnby: POD to Spouse &Lineal Descendants Money can pass to their MSAswithout being subject toMontana income taxation37What happens if I moveto another state? Unused MSA Funds Counted as Incomeon final MontanaIncome Tax Return39PlanningTechnique Person holding Power ofAttorney (agent) Person named asConservator by district court38PlanningTechnique Track medical expensesJanuary - December Deposit from savings toMSA the amount ofeligible medical careexpenses for the year40MSA ReportingRequirements Withdraw from MSA totalamount needed for eligiblemedical care expenses duringyear File Form 2: Page 4 in 2018 Department ofRevenue Formswww.revenue.mt.gov One withdrawal Deposit back to savingsafter January 1 of next year41427
Percent of Montananswith MSAsMSU Extension MontGuide Montana MedicalCare SavingsAccounts(MSAs) Only 1.4% Why? MT19981747HR43448
MT Tax Savings with MSA vs Regular Savings Account Deposit: 4,000 9 Taxable Income more than Savings MSA Savings Deposit 4,000 Interest Rate: x .0002 Earnings 8 Savings Deposit 4,000 Tax Bracket: x .069 Tax Savings: 276 Interest earnings Not subject to Montana income taxation if:
