Medical Savings Account (MSA) definition
Medical savings accounts are accounts used for paying medical bills – deposits made into the account are typically tax-deductible. In the United States, MSAs must be paired with a high-deductible health plan (HDHP) and are typically used by self-employed workers.
All withdrawals are tax-free if used to pay for medical care. MSAs will typically be used to pay for deductible medical expenses (the excess) in a given year – after the deductible has been paid, the HDHP plan will cover the remaining expenses. Any monies left in the MSA at the end of the year can be withdrawn, but will be taxed.
The medical savings account has largely been superseded by the health savings account (HSA).
