An overview of the medical savings account
The bill on Medical Savings Account (MSA) became effective on January 1, 1977 but recent amendments restricted people who can avail the MSA. At present there are only 750,000 individuals eligible for the said ‘benefit’. However, there had been steps made to allow all Americans to be able to open a medical savings account.
But with the new health care bill which is now signed as a law, a lot of people doubt how it could affect their old MSA’s. There are some changes especially when it comes to taxation but the better news is that one can still take advantage of their MSA still intact.
But what really is the medical savings account? It is a tax-free account that will allow the account holder to save some money for future medical expenses. You or your employer will be taking money which is currently spent from your health insurance and make a deposit into your medical savings account. The amount deposited into your account is just a portion of your health insurance that costs up to $1,400 per person or $3,375 for the whole family.
With the use of the fund from your MSA, your first payment of $1,400 will be made directly. The fund on your MSA will be used to pay for your medical expenses which are tax deductible at the current. The coverage is actually broad an there are about a hundred of them. Chiropractor, dental services, eye glasses, doctors, acupuncture, anesthetist and the list continues.
When there are some money left from your MSA, you have two options on how to spend them: you can save some money which is tax-free which you can use for medical expenses in the future and that the interest which is accumulated is also tax-free. You to may withdraw your money from your MSA after each year but a minimum maintaining balance is needed. If there would be some non-medical withdrawals made then it would be taxed in full with a penalty of 15%.
Medical Savings Account is seen by a lot as a way to reduce the country’s bill on health care while the choices of patients are improved.
A lot of wrong information had been disseminated regarding MSAs. Some think that taking an MSA is money draining and is only of the benefit of the healthy and wealthy ones but of course this claim has not yet been proven. According to a survey made, almost half f the population of employees would go for MSA when it is being offered. Few things to be reminded of with your MSA: effective January 1, 2100, tax-free MSA are no longer allowed to be used on over-the-counter drug purchases which aren’t doctor-prescribed. On the same date, the MSA tax distribution which isn’t utilized for legitimate medical expenses will be increased by twenty percent compared to the original ten percent.