Eligible Individual

To be eligible for an Archer MSA, you (or your spouse) must be an employee of a small employer or be self-employed. You (or your spouse) must be covered under an HDHP and have no other health coverage except permitted coverage. You must not be enrolled in Medicare and can't be another person’s dependent. You must be an eligible individual on the first day of a month to take an Archer MSA deduction for that month.

Small Employer

A small employer is generally an employer who had an average of 50 or fewer employees during either of the last 2 calendar years. See Pub. 969 for details.

Archer MSA

Generally, an Archer MSA is a medical savings account set up exclusively for paying the qualified medical expenses of the account holder.

Qualified Medical Expenses

Generally, qualified medical expenses for Archer MSA purposes are unreimbursed medical expenses that could otherwise be deducted on Schedule A (Form 1040). See the Instructions for Schedule A (Form 1040), and Pub. 502, Medical and Dental Expenses. Qualified medical expenses are those incurred by the account holder or the account holder's spouse or dependent(s). Amounts paid for menstrual care products shall be treated as paid for medical care. See the instructions for Line 7, later. You can't treat insurance premiums as qualified medical expenses unless the premiums are for:

You can find answers regarding whether certain costs related to nutrition, wellness, and general health are medical expenses that may be paid or reimbursed under an Archer MSA at IRS.gov/Individuals/Frequently-Asked-Questions-About-Medical-Expenses-Related-to-Nutrition-Wellness-and-General-Health.

High Deductible Health Plan

An HDHP is a health plan that meets the following requirements.

Other Health Coverage

If you have an Archer MSA, you (and your spouse, if you have family coverage) can't have any health coverage other than an HDHP. However, your spouse can have health coverage other than an HDHP if you aren't covered by that plan.

Disabled

An individual is generally considered disabled if they are unable to engage in any substantial gainful activity due to a physical or mental impairment that can be expected to result in death or to continue indefinitely.

Death of Account Holder

If the account holder's surviving spouse is the designated beneficiary, the Archer MSA is treated as if the surviving spouse were the account holder. The surviving spouse completes Form 8853 as though the Archer MSA belonged to them.

If the designated beneficiary isn't the account holder's surviving spouse, or there is no designated beneficiary, the account ceases to be an Archer MSA as of the date of death. The beneficiary completes Form 8853 as follows.

If the account holder's estate is the beneficiary, the fair market value of the Archer MSA as of the date of death is included in the account holder's final income tax return. Complete Form 8853 as described above, except you should complete Part I, if applicable.

The transfer isn't subject to the additional 20% tax. Report any earnings on the account after the date of death as income on your tax return.

Deemed Distributions From Archer MSAs

The following situations result in deemed distributions from your Archer MSA.

Any deemed distribution won't be treated as used to pay qualified medical expenses. Generally, these distributions are subject to the additional 20% tax.

Figuring Your Archer MSA Deduction

The amount you can deduct for Archer MSA contributions is limited by:

Any employer contributions made to your Archer MSA prevent you from making deductible contributions. See Employer Contributions to an Archer MSA, later. Also, if you or your spouse made contributions in addition to any employer contributions, you may have to pay an additional tax. See Excess Contributions You Make, later.

You can't deduct any contributions you made after you became enrolled in Medicare. Also, you can't deduct contributions if you are someone else’s dependent.

How To Complete Part I

Complete lines 1 through 5 as instructed on the form unless (1) or (2), next, applies.

Line 1

Line 2

Include on line 2 contributions you made to your Archer MSA in 2023. Also include those contributions made from January 1, 2024, through April 15, 2024, that were for 2023. Don't include amounts rolled over from another Archer MSA. See Rollovers, later.

Line 3

Go through the chart at the top of the Line 3 Limitation Chart and Worksheet for each month of 2023. Enter the result on the worksheet next to the corresponding month. Enter the amount from the last line of the worksheet on line 3.

If eligibility and coverage for both you and your spouse didn't change from one month to the next, enter the same number you entered for the previous month. If eligibility and coverage didn't change during the entire year, figure the number for January only, and enter this amount on Form 8853, line 3.

More than one HDHP.

If you and your spouse had more than one HDHP on the first day of the month and one of the plans provides family coverage, use the Family coverage rules on the chart and disregard any plans with self-only coverage. If you and your spouse both have HDHPs with family coverage on the first day of the month, you both are treated as having only the family coverage plan with the lowest annual deductible.

Line 3 Limitation Chart and Worksheet

line 5 limitation chart and line 5 limitation worksheet

Line 3 Limitation Chart and Worksheet

Line 3 Limitation Chart and Worksheet

Summary: This flowchart is used to determine the amount of deductible limitation for each month. After calculating the amount for each month in 2023, enter the amount on the line for that month in the worksheet, add them all together and divide by 12 to receive the limitation amount to be entered on Form 8853, line 3.

Start

This is the start of the flowchart.

Decision (1)

Were you enrolled in Medicare for the month?

IF Yes Continue To Process (a)

IF No Continue To Decision (2)

Process (a)

Enter 0 on the line below for the month.

Continue To End

Decision (2)

Were you an eligible individual (see page 1 of the instructions) on the first day of the month?

IF Yes Continue To Decision (3)

IF No Continue To Process (a)

Decision (3)

What type of coverage did your High Deductible Health Plan provide on the first day of the month? If you had more than one High Deductible Health Plan, see instructions on page 3.

IF Self-only coverage Continue To Process (b)

IF Family coverage Continue To Process (d)

Process (b)

Enter annual deductible (must be at least $2,650 but not more than $3,950)

Continue To Process (c)

Process (c)

Enter 65% (0.65) of the annual deductible on the line below for the month.

Continue To End

Process (d)

Enter annual deductible (must be at least $5,300 but not more than $7,900)

Continue To Process (e)

Process (e)

Enter 75% (0.75) of the annual deductible on the line below for the month. If married filing separately, see "Married filing separately".

Continue To End

End

This is the ending of the flowchart.

Please click here for the text description of the image.

Line 4

Line 5

If you (or your employer) contributed more to your Archer MSA than is allowable, you may have to pay an additional tax on the excess contributions. Figure the excess contributions using the following instructions. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the additional tax.

Line 6a

Enter the total distributions you and your spouse received in 2023 from all Archer MSAs. These amounts should be shown in box 1 of Form 1099-SA.

Line 6b

Include on line 6b any distributions you received in 2023 that were rolled over. See Rollovers below. Also include any excess contributions (and the earnings on those excess contributions) included on line 6a that were withdrawn by the due date, including extensions, of your return. See the instructions for line 5, earlier.

Line 7

In general, include on line 7 distributions from all Archer MSAs in 2023 that were used for the qualified medical expenses (see Qualified Medical Expenses, earlier) of:

For this purpose, a child of parents who are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child as their dependent.

However, if you or your employer made a contribution to your Archer MSA in 2023 and you used withdrawals to pay expenses for an individual who wasn't covered by an HDHP or was covered by a plan that wasn't an HDHP (other than the exceptions listed under Other Health Coverage, earlier) at the time the expenses were incurred, then you shouldn't include those withdrawals on line 7.

Lines 9a and 9b

Medicare Advantage MSA

A Medicare Advantage MSA is an Archer MSA designated as a Medicare Advantage MSA to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare and have an HDHP that meets the Medicare guidelines. Contributions to the account can be made only by Medicare. The contributions and any earnings, while in the account, aren't taxable to the account holder. A distribution used exclusively to pay for the qualified medical expenses of the account holder isn't taxable. Distributions that aren't used for qualified medical expenses of the account holder are included in income and also may be subject to a penalty.

Death of Account Holder

If the account holder's surviving spouse is the designated beneficiary, the Medicare Advantage MSA is treated as a regular Archer MSA (not a Medicare Advantage MSA) of the surviving spouse for distribution purposes. Follow the instructions in Section A for Death of Account Holder, earlier.

If the designated beneficiary isn't the account holder's surviving spouse, or there is no designated beneficiary, the account ceases to be an MSA as of the date of death. The beneficiary completes Form 8853 as follows.

If the account holder's estate is the beneficiary, the fair market value of the Medicare Advantage MSA as of the date of death is included in the account holder's final income tax return.

The transfer isn't subject to the additional 50% tax. The beneficiary should report any earnings on the account after the date of death as income on the beneficiary's tax return.

Additional 50% Tax Worksheet—Line 13b

1.	Enter the total distributions included on Form 8853, line 12, that don't meet either of the exceptions to the additional 50% tax								1.	_____
2.	Did you have a Medicare Advantage MSA on December 31, 2022?
	No. Enter one-half of line 1 above on Form 8853, line 13b.
	Yes. Enter the value of your Medicare Advantage MSA on December 31, 2022					2.	_____
3.	Enter the amount of the annual deductible for your HDHP policy on January 1, 2023		3.	_____
4.	Multiply line 3 by 60% (0.60)					4.	_____
5.	Subtract line 4 from line 2. If zero or less, enter -0-								5.	_____
6.	Subtract line 5 from line 1. If zero or less, enter -0-								6.	_____
7.	Enter one-half of line 6 here and on Form 8853, line 13b								7.	_____

Line 10

Enter the total distributions you received in 2023 from all Medicare Advantage MSAs. These amounts should be shown in box 1 of Form 1099-SA. This amount shouldn't include any erroneous contributions made by Medicare (or any earnings on the erroneous contributions) or any amounts from a trustee-to-trustee transfer from one Medicare Advantage MSA to another Medicare Advantage MSA of the same account holder.

Line 11

Enter the total distributions from all Medicare Advantage MSAs in 2023 that were used only for the account holder's qualified medical expenses (see Qualified Medical Expenses, earlier).

You can't take a deduction on Schedule A (Form 1040) or Schedule A (Form 1040-NR) for any amount you include on line 11.

Lines 13a and 13b

Definitions

Line 15

Special rules apply in determining the taxable payments if other individuals received per diem payments under a qualified LTC insurance contract or as accelerated death benefits with respect to the insured listed on line 14a. See Multiple Payees, later, for details.

Line 18

If you have more than one LTC period, you must separately calculate the taxable amount of the payments received during each LTC period. To do this, complete lines 18 through 26 on separate Sections C for each LTC period. Enter the total on line 26 from each separate Section C on the Form 8853 that you attach to your tax return. See the instructions for line 21 for the LTC period.

Line 19

Enter the total accelerated death benefits you received with respect to the insured listed on line 14a. These amounts are generally shown in box 2 of Form 1099-LTC. Include only amounts you received while the insured was a chronically ill individual. Don't include amounts you received while the insured was a terminally ill individual. If the insured was redesignated from chronically ill to terminally ill in 2023, only include on line 19 payments received before the insured was certified as terminally ill.

Line 21

The number of days in your LTC period depends on which method you choose to define the LTC period. Generally, you can choose either the Contract Period method or the Equal Payment Rate method. However, special rules apply if other persons also received per diem payments in 2023 under a qualified LTC insurance contract or as accelerated death benefits with respect to the insured listed on line 14a. See Multiple Payees, later, for details.

Line 22

Qualified LTC services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal care services required to treat a chronically ill individual under a plan of care prescribed by a licensed health care practitioner.

Line 24

Enter the reimbursements you received or expect to receive through insurance or otherwise for qualified LTC services provided for the insured for LTC periods in 2023. Box 3 of Form 1099-LTC should indicate if payments were made on a reimbursement basis.

Generally, don't include on line 24 reimbursements for qualified LTC services you received under a contract issued before August 1, 1996. However, you must include reimbursements if the contract was exchanged or modified after July 31, 1996, to increase per diem payments or reimbursements.

Multiple Payees

If you checked “Yes” on lines 15 and 16 and the only payments you received were accelerated death benefits that were paid because the insured was terminally ill, skip lines 17 through 25 and enter -0- on line 26.

In all other cases in which you checked “Yes” on line 15, attach a statement duplicating lines 18 through 26 of the form. This statement should show the aggregate computation for all persons who received per diem payments under a qualified LTC insurance contract or as accelerated death benefits because the insured was chronically ill. Each person must use the same LTC period. If all the recipients of payments don't agree on which LTC period to use, the contract period method must be used.

After completing the statement, determine your share of the per diem limitation and any taxable payments. The per diem limitation is allocated first to the insured to the extent of the total payments the insured received. If the insured files a joint return and the insured's spouse is one of the policyholders, the per diem limitation is allocated first to them to the extent of the payments they both received. Any remaining limitation is allocated among the other policyholders pro rata based on the payments they received in 2023. The statement showing the aggregate computation must be attached to the Form 8853 for each person who received a payment.

Enter your share of the per diem limitation and the taxable payments on lines 25 and 26 of your individual Form 8853. Leave lines 21 through 24 blank.

Example 1

Anna was chronically ill in 2023 and received 12 monthly payments on a per diem basis from a qualified LTC insurance contract. She was paid $2,000 per month ($24,000 total). Anna incurred expenses for qualified LTC services of $150 per day ($54,750) and was reimbursed for one-half of those expenses ($27,375). She uses the equal payment rate method and thus has a single benefit period for 2023 (January 1–December 31). Anna completes Form 8853, lines 20 through 26, as follows.

Example 2

The facts are the same as in Example 1, except Anna's adult children, Ben and Cleo, each also own a qualified LTC insurance contract under which Anna is the insured. Neither Ben nor Cleo incurred any costs for qualified LTC services for Anna in 2023. From July 1, 2023, through December 31, 2023, Ben received per diem payments of $5,000 per month ($30,000 total) and Cleo received per diem payments of $3,000 per month ($18,000 total). Anna, Ben, and Cleo agree to use the equal payment rate method to determine their LTC periods.

There are two LTC periods. The first is 181 days (January 1–June 30) during which the per diem payments were $2,000 per month. The second is 184 days (July 1–December 31) during which the aggregate per diem payments were $10,000 per month ($2,000 under Anna's contract + $5,000 under Ben's contract + $3,000 under Cleo's contract).

An aggregate statement must be completed for the second LTC period and attached to Anna’s, Ben's, and Cleo's forms.