Various tax options exist when saving for medical costs

People who take certain steps to save money for future health costs may find that they can receive certain benefits at tax filing time.

According to the IRS Web site, such options include health savings accounts, medical savings accounts and health flexible spending arrangements.

With a health savings account, individuals as well as employers and family members, can all make contributions. Non-employer contributions are said to be deductible on an individual''s return regardless of whether that person itemizes their deductions. Also, distributions from such accounts that are used for qualified health care-related expenses are not taxed.

The IRS also explains that under an Archer medical savings account, contributions are deductible, regardless of whether one itemizes. These accounts can receive contributions from eligible individuals and employers, although not in the same year, and employer contributions are not counted as income. Distributions from these accounts are also not taxed.

Certain taxpayers can also benefit from a Medicare Advantage MSA, which is similar to the Archer MSA but applies to those enrolled in the federal program.

Finally, taxpayers may also use health flexible spending arrangements and health reimbursement arrangements to save money for future medical needs while also potentially lowering their tax burden.

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