Medical Savings Account Deadline Approaches | News
Montana State University Extension would like to remind Montana residents to open a Montana health care savings account or make deposits to their account by December 31 to save money on income tax.
A Montana Healthcare Savings Account is an account used to reduce the cost of saving for medical expenses and long-term health care. According to Marsha Goetting, home economics specialist at MSU Extension, an MSA offers several benefits, including reduced state income tax.
For example, if a person has taxable income greater than $ 18,400, they could save about $ 276 in state income taxes by opening an MSA and depositing up to $ 4,000 for the year d. Taxation 2021. The MSA earns interest free of Montana income tax and the balance at the end of the year extends for future use.
Goetting added that an MSA can also be passed on to others after death. By placing a payable on death designation, or POD, on the account, individuals can leave an inheritance for spouses, children or grandchildren to use for their own medical expenses. There are also no inheritance taxes on MSA, and as long as an individual’s estate is valued at less than $ 11.7 million in 2021, there is also no d federal inheritance tax. The federal exemption is expected to increase to $ 12.06 million in 2022.
âWithout a POD beneficiary, the money goes to your heirs according to your written will,â Goetting said. âIf you don’t have a written will, the MSA passes by Montana law to your heirs with priority given to a spouse. In all cases, an inheritance is provided. If you don’t have beneficiaries, you can name your preferred nonprofit as the POD beneficiary. “
Although the maximum amount used to reduce a Montanan’s taxable income is $ 4,000 per year, Goetting said a person can also put less than $ 4,000 into an MSA. The amount used to reduce the income tax for Montana residents is the total amount deposited into the MSA during the tax year, not the amount withdrawn for qualifying medical expenses between January and December. .
Eligible expenses include medical insurance premiums; prescription drugs; medical, dental and home care; eyeglasses; crutches; and transport for medical care.
âMontana considers qualifying medical expenses as anything accepted by the IRS,â Goetting said. IRS Publication 502 provides a detailed list of qualifying expenses and can be found at irs.gov/publications/p502.
All resident taxpayers are eligible to set up an MSA at a local financial institution, even if they have another employer-provided health care plan, a Section 125 Flexible Spending Account, or a Federal Account. health savings. A taxpayer does not need to be affiliated with a high deductible health insurance plan to be eligible for the MSA. And people 65 and over can still have an MSA but not the HSA.
âMontana Healthcare Savings Accounts (MSA) for Tax Year 2021â is available at store.msuextension.org. Hard copies are available at county or extension reservation offices.