Welcome to our MSA FAQ

We've compiled a list of the typical MSA questions we receive and we're always looking to make this list better.  If you can't find what you're looking for, please don't hesitate to contact our office or fill out the form on the right and we'll get right back to you with your answer.  We may even add it to the FAQ!

Thanks for stopping by, and please don't hesitate to let us know how we can help.  That's exactly what we're here for!


Frequently Asked Questions

Q.  What is an MSA?
A.

Simply put, an MSA (medical savings account) is a tax-favored bank account that allows you to both deposit and spend funds tax-free in order to help Idahoans reduce healthcare costs.  

The MSA is only recognized as a tax shelter by the State of Idaho, and does not carry Federal tax benefits like an HSA (health savings account).  

Visit our full webpage dedicated to the description of the medical savings account to learn more!

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Q.  Is the MSA tax break only for the Idaho State level?
A.

Yes, the tax shelter for the MSA only applies to the State of Idaho.  The MSA does not carry Federal tax benefits like a health savings account

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Q.  Is my MSA tied to my insurance policy?
A.

No, the Idaho MSA is completely independent of your insurance policy.  You can even open a Medical Savings Account if you don't have any health insurance at all! 

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Q.  Do I even need insurance to open an MSA?
A.

No!  You can open a medical savings account with or without any insurance plan. 

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Q.  Do VA Benefits or Tricare affect my MSA?
A.

No!  No other insurance policy (including VA Benefits and/or Tricare) affects your eligibility to open or contribute to your Idaho MSA. 

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Q.  How much can I contribute to my MSA each year?
A.

For calendar year 2014, you can contribute:

  • $10,000 if you file a "single" tax return
  • $20,000 if you file "joint" tax returns
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Q.  Can my employer contribute to my MSA?
A.

Absolutely!  Your employer and/or anyone else can contribute to your Medical Savings Account. 

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Q.  Can I contribute to my MSA any time during the year?
A.

Yes, you can contribute to your Idaho MSA at any time during the calendar year, for any amount you wish (as long as you don't exceed the annual contribution limits).

It is important to note that contributions to your MSA will only count towards the calendar year in which you make the contribution.  

For example, you cannot contribute money in February 2015 and have the money applied to tax year 2014.  Some accounts (like health savings accounts) allow this up until the day you file your taxes for the fiscal year.  The MSA does not, and is strictly based on the calendar year.

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Q.  What if I deposit money into my MSA by mistake?
A.

You have 30 days to remove the funds deposited in error.  If the 30 day grace period is exceeded, there are tax consequences. 

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Q.  What if I withdraw money from my MSA by mistake?
A.

You have 30 days to replace the funds withdrawn in error.  If you fail to replace them within the 30 day grace period, you will pay income tax on the funds withdrawn in addition to a 10% penalty.

Replacing the funds withdrawn in error does not count as a contribution to your MSA.  In other words, it does not count towards your annual contribution limit. 

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Q.  Can I wait until an expense occurs before I deposit money into my MSA to pay for it?
A.

Yes, however the money must be in the MSA before you pay the expense.

Example:  

  • Today you go to the doctor and it costs you $500.
  • Tomorrow you open up an MSA and put $200 in it.
  • At the end of the month, you pay your doctor $500 from your normal checking account.
    • So you've paid your $500 doctor bill from checking, and have $200 sitting in your MSA.
  • The middle of next month, you deposit $300 more into your MSA.
    • You now have $500 sitting in your MSA.
  • You may only reimburse yourself $200 total from your MSA.
    • This is because $200 was the amount in the MSA when you paid the bill from your checking account.
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Q.  Does my MSA have to be open when a medical expense occurs in order for me to use MSA funds to pay for it?
A.

 No. You can open your Medical Savings Account after the medical expense occurred, and still use MSA funds to pay for it.

However, once you pay for it (or part of it) you cannot reimburse yourself for any cost greater than what you had in your MSA at the time you paid any portion of that medical expense.

So what you CANNOT do is incur a medical expense, pay for it with your normal checking account, then go open an MSA and fund it to reimburse what you paid.

It all revolves around not on when the expense occurred, but when you paid any portion of the expense.

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Q.  What are qualified medical expenses?
A.

Qualified medical expenses are defined by the IRS as "expenses that must be primarily to alleviate or prevent a physical or mental defect or illness".  This typically includes insurance premiums, doctor or hospital bills, dental and eyecare costs...even band aids and crutches.

The list is very extensive, and you can learn more about what is both included and excluded by contacting our office or reading IRS Publication 502.

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Q.  Can I pay for my spouse or children? What if they aren't dependents?
A.

You can use the funds in your Idaho MSA to pay for eligible medical expenses for your spouse, and for your dependent children.  You can even use the funds to pay for your children if you can't claim them as a "dependent" on your tax return!

Title 63 of the Idaho Statutes on Revenue and Taxation states that if your children or grandchildren fall under the definition they provide for a "dependent child", you can use your MSA funds for their eligible medical expenses.  Their definition of a "dependent child" is as follows:

  • Under twenty-one (21) years of age, or enrolled as a full-time student at an accredited college or university.
     
  • Legally entitled to the provision of proper or necessary subsistence, education, medical care or other care necessary for his or her health, guidance or well-being and not otherwise emancipated, self-supporting, married or a member of the armed forces of the United States.
     
  • Mentally or physically incapacitated to the extent that he or she is not self-sufficient.
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