MontGuide - FAMILY FINANCIAL MANAGEMENT - Montana Medical Care Savings Accounts (MSAs) for the 2026 Tax Year - Revised 07/26

Sep 19, 2026

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Montana Medical Care Savings Accounts (MSAs) allow Montana residents to save for eligible medical expenses, health insurance premiums, and long-term health care while reducing Montana state income taxes. The guide explains account rules, permitted asset types, separate-account and access requirements, and how interest or dividends are treated while held or used for qualifying expenses. It details eligibility for adults, limits on minor children, who may receive MSA-paid expenses, annual contribution caps for 2026, and how deductions and withdrawals are calculated for state versus federal tax purposes.

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Who is eligible to open an MSA?

Who can use funds from an MSA?

What is the limit on a yearly contribution to an MSA?

How do contributions reduce Montana income tax?

What medical expenses are eligible for a withdrawal from an MSA?

MontGuide Patti Goroski FAMILY FINANCIAL MANAGEMENT MT199817HR, REVISED 07/26 Montana Medical Care Savings Accounts (MSAs) for the 2026 Tax Year By Marsha A. Goetting, Ph.D. , CFP® Professor and MSU Extension Family Economics Specialist The Montana Medical Care Savings Account Act (MSAs) allows Montanans to save money for eligible medical expenses, health insurance premiums, and long-term health care while reducing their state income taxes. This MontGuide provides answers to frequent questions Montanans have about MSAs. Note: All examples within this MontGuide use the MSA limit for the 2026 tax year of $4,800. WHILE THE TERM “MEDICAL CARE SAVINGS ACCOUNT”implies a savings account or a checking account, a certificate of deposit is also allowed. Other MSA options include stocks, bonds, and mutual funds. Individuals should consider how liquid their account is at the time they expect to need it for eligible medical expenses. For example, most people would not want to sell mutual funds to pay for medical expenses when the market is down. An MSA must be separate from other accounts, and only the account holder can have access to the funds. Joint accounts for MSAs are not allowed. Spouses must set up separate accounts for MSAs. The money deposited in an MSA and the interest or dividends earned are not subject to Montana income taxation while in the account or if used for eligible medical expenses for the account holder or anyone else the account owner chooses. Medical providers do not need payment directly from the account, but supporting documentation of medical expenses and payment is required of the MSA account holder. Who is eligible to open an MSA? All resident taxpayers aged 18 and older are eligible to set up an MSA even if they have another health care plan provided by their employer, a Section 125 Flexible Spending Account (FSA), or a Federal Health Savings Account (HSA). A taxpayer does not have to be in a high deductible health insurance planto be eligible for an MSA, as they do for the federal HSA. A person can be on Medicare and still eligible for an MSA. An MSA cannot be set up for a minor child under age 18. However, parents can use their MSAs to pay for eligible medical expenses for a minor child, as well as children over the age of 18. Who can use funds from an MSA? Formerly, funds in an MSA could be used only for eligible medical expenses for the account holder or their parents, spouse, or children. As of January 1, 2018, money in an MSA can pay eligible medical care expenses for ANYONE the account holder chooses. What is the limit on a yearly contribution to an MSA? The maximum amount a Montana resident can contribute to an MSA is $4,800 during 2026. Montana has no limitation on the amount of funds and interest that may be accumulated taxfree within an MSA. Some individuals deposit the maximum annually into an MSA but do not use the funds because they are building up an account for anticipated increases in medical bills as they age. A person can also contribute less than the maximum of $4,800 in an MSA. The amount deposited to an MSA reduces the account holder’s income as reported on the Montana tax form, resulting in a lower state income tax. The contribution limit for 2027 will be announced by the Department of Revenue (DOR) after September 1, 2026. If the money is left in the MSA (or withdrawn for eligible medical expenses), the amount is not subject to state income taxation. The amount used to reduce income for Montana income tax purposes is the total amount deposited in the MSA during the tax year, not the amount withdrawn for eligible medical expenses. A similar reduction in income, however, is not allowed for federal income tax purposes. Example (single person): Barbara, a county employee, set up an MSA at a local bank and deposited $4,800 in the account on January 31, 2026. During the year, she had $2,500 in eligible medical expenses. On Barbara’s Montana Individual Inc

FAQs

Who is eligible to open an MSA in Montana?

All resident taxpayers aged 18 and older may set up an MSA even if they have other health coverage options. A person does not need a high-deductible plan to qualify, and eligibility can include individuals on Medicare.

Can an MSA be used for expenses for anyone the account holder chooses?

Yes. Starting January 1, 2018, funds in an MSA can pay eligible medical care expenses for ANYONE the account holder chooses.

What is the 2026 annual contribution limit and how is it used for Montana income tax?

For 2026, the maximum Montana MSA contribution is $4,800. The total amount deposited during the tax year reduces the account holder’s Montana taxable income, regardless of how much is withdrawn for eligible expenses.

Sep 19, 2026

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