When and how to open a medical savings account

A medical savings account or MSA is typically used by self-employed people or people who have small businesses that have less than 50 employees. For self-employed persons, they open a medical savings account because most often than not, they cannot afford high premiums set by health care insurance companies. Also, some do not have access to benefits provided by the government for health care and medical care insurance which is why they open up a such an account so they can have something in case of an emergency.

The benefit of having a medical savings account is that the deposits made to it is tax free. This is the government’s way of giving incentive to what should help the citizens when undergoing health issues. Also, the withdrawals are tax exempt given that it will be solely used for medical expenses. There are qualifications as to what medical expenses are tax-free so there is a possibility that not all deposits made on this account will be tax exempt. The medical savings account should be accompanied by what we call a high deductible health plan or HDHP. This plan will be able to cover other expenses so as to save and secure the funds put in this type of account.

So, when should you open a medical savings account? It is best to open this type of account as soon as you can. After all, you’d want to start building up the funds since most medical expenses are undeniably very expensive. Before opening an MSA though, the IRS provides qualifications before they can consider the deposits as qualified contributions to be tax-exempt. You have to fill out a form so you can get the tax-free quality to get going. Another is that eligibility is still needed when opening a medical savings account. The IRS provides information about the qualifications the tax payers must have to be able to get an MSA.

If you are employed, ask your human resources department on what institutions can provide you this type of savings account. They have a list of dependable institutions that can assist you in saving up for medical care through medical savings account. If you are self-employed on the other hand, you need to contact a health insurance company that offers a high deductible health plan that is also eligible for MSA. It may be a very tedious process but having it can actually help in the future since you can have funds available without having to file claims with typical medical insurance policies.