View
212
Download
0
Category
Tags:
Preview:
Citation preview
Montana Medical Care Savings Accounts
MontGuide199817 HR
Revised January 20151
What is an MSA?• An account that can be used for paying eligible medical expenses that are not covered by: Health insurance policy Flexible spending plan
(FSA)
2
Where to establish MSA accounts?
• Bank• Savings Bank• Credit Union
3
Where to establish MSA accounts?
• Trust company• Mutual fund company• Brokerage firm
4
Caution• Minimum Balance?
May range from $20 to $1,000
• Fees? • For monthly withdrawals that exceed a certain amount
5
MSA Rules
• Must be separate from other accounts
• Joint accounts for MSAs not allowed
6
Who is Eligible?
•Montana resident tax payers only
7
Minor Child
•Cannot establish MSA for: –Minor child under age 18
8
Parents’ MSAs
•May be used for minor child’s eligible medical expenses
9
MSA Deduction
• $3,000 for each taxpayer
• $6,000 married couple
Separate Accounts Can use funds for one another
10
MSA Saves on Montana Income Taxes
• Contributions:–Reduce Montana income
by amount deposited–Taxes saved depend on tax
bracket 11
Montana Taxable Income
Adjusted income $ 49,000 MSA deposit - $ 3,000 Taxable Income $46,000
12
Tax Brackets & Rates Montana- 2014
13
At Least But less Than Then your tax is:
$0 $2,800 1%
$2,800 $5,000 2%
$5,000 $7,600 3%
$7,600 $10,300 4%
$10,300 $13,300 5%
$13,300 $17,100 6%
$17,100 or more 6.9%
www.revenue.mt.gov
MT Tax Savings with MSA vs Regular Savings AccountDeposit: $3,000
14
• Taxable Income more than $17,100 (6.9% tax bracket)
Savings MSASavings Deposit $3,000
Interest Rate: x .0005Earnings $ 1.50
Savings Deposit $3,000 Tax Bracket: x .069
Tax Savings: $207
Example: Barbara
• January 31–$3,000 deposited in MSA
• Had $2,000 eligible medical expenses during year
15
Barbara’s Montana Income
• Reduced by $3,000 Not $2,000 withdrawn
16
Adjusted income $ 42,000MSA deposit - $3,000Taxable Income $ 39,000
Reduced Income for Tax Purposes
• Total deposited in MSANot amount withdrawn for
medical expenses 17
Interest earnings
• Not subject to Montana income taxation if:–Left in the account–Withdrawn for eligible medical care
expenses
18
What are eligible medical expenses?
• Montana accepts any health care expense allowed as a deduction on federal income tax return as “eligible”
• IRS Publication 50219
Eligible MSA Expenses
• Health insurance premiums
• Long-term care insurance or annuity
20
Eligible MSA Expenses
•Prescribed drugs• Insulin•Dental care
21
Eligible MSA Expenses
• Eyeglasses• Crutches • Hearing Aids• Nursing Home Care
22
Medicare Part A
•Not an eligible medical expense Covered by Social Security
23
Medicare Parts B & D
•Eligible medical expenses
24
Not Eligible
• Any medical expenses that are or have been reimbursed by some other type of insurance:– Health policy– Automobile policy– Workers Compensation
25
Double dipping not allowed
Can’t claim twice for same expense:
If claimed for FSA or HSA can’t claim for MSA
26
Who are Eligible Dependents?
• Spouse• Child
– Age 19 & under – Age 23 & under
• (if in college)27
Who can administer my MSA?
• You can Self-administered account Almost all MSAs are self-
administered
• Someone you pay Registered Account
Administrator 28
What if I need money for non-eligible expenses?
• Considered non-eligible withdrawal: –Subject to 10% penalty–Withdrawal counted as income in
Montana• Unless withdrawn on last business day of
the year 29
Example: Duane
• Withdraws $6,000 to buy car in July 2014
Adjusted Income $ 40,000 MSA Withdrawal + 6,000 Taxable Income $ 46,000
30
Example: Duanenon-eligible withdrawal
Increased Taxes ($6,000 x 6.9%) $ 41410% Penalty + 600 Total Cost of Withdrawal: $1,014
31
No 10% Penalty
1. If non-eligible withdrawal made on last business weekday of December• Amount included as income,
however
32
No 10% Penalty
2. Withdrawal due to death of account holder• Amount included in
decedent’s income in year died, unless POD spouse or lineal descendant
33
3. Direct transfer to another MSA with different financial institution • Caution, wire transfer fees $25
to each institution
No 10% Penalty
34
4. Direct transfer from one type of savings account to another within the financial institution: Example: MSA savings
account to MSA CD
No 10% Penalty
35
• Withdrawals (not for eligible medical care expenses)
Reported MSA Form Rev. 04 14
Reporting 10% Penalty
36
• Withdrawal for medical expenses paid in prior year –Must be made by
January 15
Dept of Revenue Rule
37
What happens to my MSA when I die?
• Balance passes by: – POD Beneficiary Designation
– Written Will
– Montana Intestacy Statutes• Dying Without a Will
38
Income tax savings to Beneficiaries
• POD to Spouse & Lineal Descendants Money can pass to their MSAs
without being subject to Montana income taxation
39
What if I become incapacitated?
• Funds can be withdrawn by: –Person holding Power of
Attorney (agent)–Person named as Conservator by district
court
40
What happens if I move to another state?
• Unused MSA Funds– Counted as Income on
final Montana Income Tax Return
41
Planning Technique
• Track medical expenses January - December
• Deposit from savings to MSA the amount of eligible medical care expenses for the year
42
Planning Technique
• Withdraw from MSA total amount needed for eligible medical care expenses during year – One withdrawal
• Deposit back to savings
43
FormsDepartment of Revenuewww.revenue.mt.gov
44
MSA Reporting Requirements
• File Form: Annual Reporting Form for Self
Administered Individual Accounts
Department of Revenuewww.revenue.mt.gov
45
Enter Amount OnMontana Individual Income Tax Return
• Form 2 Schedule II: Line 18
• Form 2M Line 32
46
Form-MSA
Simple to fill out: • Name• Social Security Number• Name & Address of
Financial Institution • MSA account number
47
1. Current year deposits• No more than $3,000
2. Deposits from prior years not counted
3. Add lines 1 & 24. Add interest and other
income5. Add lines 4 & 5
48
Form MSA: Summary
Percent of Montanans with MSAs
• Only 1.4%• Why?
49
Montana Medical Care Savings Accounts
MontGuide199817 HR
Revised January 201550
Recommended