Will you have any medical expenses during 2011 that won’t be covered by a health insurance policy or a flexible spending account (FSA)?  If so, you can open a Montana Medical Care Savings Account (MSA) by Dec. 31 to cover those expenses.

Up to $3,000 of your deposit in the account, per taxpayer, is deductible from 2011 Montana adjusted gross income, thus reducing taxes. The Montana State University Extension MontGuide “Montana Medical Care Savings Accounts” provides information about the benefits of opening a Montana medical care savings account before Dec. 31.

“This tax advantage does not apply to your federal income taxes and should not be confused with the Federal Health Savings Plans (FHAs),” cautions Marsha Goetting, MSU Extension family economics specialist.

People should contact their financial institution, such as a bank or credit union, to establish an MSA account. A Montanan with taxable income over $16,000 could save about $207 in state income taxes by depositing the maximum $3,000 in a Montana MSA.

“It doesn’t matter if you have already paid your 2011 medical bills either by check, credit or debit card,” said Goetting. “You can add up those expenses and make a deposit by December 31 of this year and reimburse yourself from your Montana MSA as late as January 15, 2012 in some instances.”

The key word is paid. You can reimburse yourself for paid eligible medical expenses as late as January 15, 2012. But if you haven’t yet paid those bills because the insurance company hasn’t sorted out what it will pay and what you owe, you still have until after January 15 to reimburse yourself.

State income tax savings depends on the total amount deposited in the MSA. For example, if you deposited $3,000 in an MSA but only used $100 during the year, you still get to reduce your income for Montana income tax purposes by $3,000. The remainder ($2,900) is carried over in the MSA without penalty and may be used for future years to pay eligible medical expenses.

A husband and wife who each establish an individual MSA can receive a $6,000 deduction when filing a joint Montana income tax return. That saves them about $414 on their state income taxes. Joint accounts for an MSA are not allowed. Only individual accounts are eligible for the Montana MSA deduction, thus husbands and wives must open separate MSA accounts.

MSA amounts held in the name of a husband or wife can be used to pay the medical bills of either spouse or their dependent children, Goetting said. For example, “if a husband had $6,000 in medical expenses during 2011, $3,000 from his MSA and $3,000 from his wife’s MSA could be used,” said Goetting.

“Montana Medical Care Savings Accounts are not like flexible spending accounts where you use it or lose it,” Goetting emphasized.

Eligible expenses include medical insurance premiums, long-term care insurance, dental care (including orthodontists), eyeglasses or contacts, or prescription drugs that are paid during the year. Not covered are medical-related bills that have been already covered by a supplemental, primary or self-insured plan. Basically, Montana accepts as eligible expenses any that are listed in the IRS 502 Publication, “Medical and Dental Expenses,” which is on the Web at http://www.irs.gov/pub/irs-pdf/p502.pdf.

An MSU Extension MontGuide will help you decide if you would benefit from a Montana medical care savings account. Montana Medical Care Savings Accounts (MontGuide 199817 HR) is free if picked up from your local MSU County Extension office. Or, download it free from the web at http://msuextension.org/publications/FamilyFinancialManagement/MT199817HR.pdf.