Online Guide to
Medical Savings Accounts

A Medical Savings Accounts (MSA) is a tax deferred accounts that allows taxpayers to save money for medical expenses.

An employer or self employed individual can use the money that currently pays for health insurance and deposit a portion of it into a newly established Medical Savings Account (MSA), up to $1,400 for an individual or $3,375 for a family. The other portion is used to purchase a high deductible health insurance policy.

MSA funds are used to pay the first $1,400 worth of medical expenses directly. These expenses are broadly defined and cover any medical expense that is currently tax deductible.

Medical Savings Accounts provide an incentive to shop carefully for medical care. Left over money (including accumulated interest) can either be saved tax free for future medical expenses, or partially withdrawn for nonmedical expenses subject to taxation and a 15 percent penalty.