Can I deduct medical expenses paid with RMSA funds? Note: I contributed to my RMSA with After tax $'s, but my company also contributed 20% to my RMSA at no expense to me.

[Hopeful]

Since my contributions to the RMSA were after tax, I was hoping I could deduct my medical expenses for 2017 that were paid from my RMSA account.  Can I do that?

In searching TurboTax and other sites online, I do not find anything specific regarding RMSA's.  I find a lot of information on HSAs and MSAs, and for those accounts you cannot deduct funds because they are "Pre-Tax" $'s, but since the RMSA is "After-Tax", I would think that I could deduct those medical expenses paid out of my RMSA.

Best regards,

Hopeful 😉

[BMcCalpin · Accepted solution]

The IRS does not recognize a "retirement (or retiree) medical savings account"; however, it may be that this is referring to a type of "Medicare Advantage medical savings account".

You need to ask your plan administrator if this is a type of Medicare Advantage MSA, as described on page 15 in IRS Publication 969 (https://www.irs.gov/pub/irs-pdf/p969.pdf). If so, you can use the dollars in the account to pay for medical expenses tax free. Since the earnings on that account are tax-free and the employer contributions may be tax-free, this is a benefit to you.

However, as for your original question, yes, after-tax dollars can be deducted on Schedule A for qualified medical expenses. However, some of these RMSAs claim to allow dollars in the account to earn tax-free income, and unless it's a Medicare Advantage MSA, I don't see how that works.

In any case, if an amount is earned tax-free inside the account, it cannot be deducted on Schedule A. In addition, if your company really contributed 20% to the account without you paying income tax on that 20%, you cannot deduct that either.