Medical savings account is a type of insurance plan that pay for qualified medical expenses. The funds in the medical savings account are exempted from the tax just like the individual retirement account (IRA). The medical savings account can be setup with a health plan that has a high deductible amount.

The fund in the MSA account is deductible for the federal income tax. It will be not be conted towards the employer’s gross income. The interests that are accumulated on the fund will not be included in the tax calculation of the gross income.

The money that is withdrawn from the MSA account can be used to pay for eligible medical expense without getting taxed. You can use the MSA fund to pay qualified medical expenses that can be declared for the income tax. The fund can also be used to pay long term health insurance plan when you are not under employment. If you want to withdraw the funds for other purposes, you may be subjected to tax. If you are older than 65 years old, you can be excluded from paying tax.