What is a Qualified Medical Expense?
If you have a Medicare Savings Account (MSA) plan, this money is intended to be used for Qualified Medical Expenses. When you spend the money on Qualified Medical Expenses, it is not taxed; however, it is taxed if you spend it on anything else.
All qualified medical expenses are tax deductible, but they are not all eligible to count toward your deductible. This is important to consider, as you need to meet your deductible before your plan starts to cover expenses. If you use your MSA to cover the costs, not counting towards your deductible, you may pay more out of pocket overall.
Examples of expenses that count toward your deductible
- Hospital stays
- Provider visits
- Durable medical equipment (DME)
- Home health care
- Skilled nursing care
Note: follow your plan’s coverage rules to ensure these expenses count towards your deductible
Examples of expenses that do not count toward your deductible
- Dental care
- Vision care
- Prescription drug premiums
- Prescription drug deductibles
- Prescription drug copays
- Prescription drug coinsurance
Can I use my MSA account for other expenses?
You can use the money in your MSA account for non-medical expenses, but it is essential to know that it becomes taxable income. Keep this in mind when using the MSA money to cover rent, bills, groceries, etc., and ensure you have planned appropriately.