Eligibility
Must be an employee of a small employer (50 or fewer employees) or self-employed, covered by an HDHP, and not covered by other non-HDHP health plans.
Frequently Asked Questions
Who is eligible for the Archer MSA Deduction?
Must be an employee of a small employer (50 or fewer employees) or self-employed, covered by an HDHP, and not covered by other non-HDHP health plans.
How does the Archer MSA Deduction work?
Allows a deduction for cash contributions to an Archer Medical Savings Account for eligible individuals covered under a high deductible health plan (HDHP) employed by a small employer or self-employed.
What law authorizes the Archer MSA Deduction?
The Archer MSA Deduction is authorized under IRC §220 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §220
Source: Internal Revenue Code, Title 26, United States Code
§ 220. Archer MSAs(a) Deduction allowedIn the case of an individual who is an eligible individual for any month during the taxable year, there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by such individual to an Archer MSA of such individual.
(b) Limitations(1) In generalThe amount allowable as a deduction under subsection (a) to an individual for the taxable year shall not exceed the sum of the monthly limitations for months during such taxable year that the individual is an eligible individual.
(2) Monthly limitationThe monthly limitation for any month is the amount equal to 1⁄12 of—(A) in the case of an individual who has self-only coverage under the high deductible health plan as of the first day of such month, 65 percent of the annual deductible under such coverage, and
(B) in the case of an individual who has family coverage under the high deductible health plan as of the first day of such month, 75 percent of the annual deductible under such coverage.
(3) Special rule for married individualsIn the case of individuals who are married to each other, if either spouse has family coverage—(A) both spouses shall be treated as having only such family coverage (and if such spouses each have family coverage under different plans, as having the family coverage with the lowest annual deductible), and
(B) the limitation under paragraph (1) (after the application of subparagraph (A) of this paragraph) shall be divided equally between them unless they agree on a different division.
(4) Deduction not to exceed compensation(A) EmployeesThe deduction allowed under subsection (a) for contributions as an eligible individual described in subclause (I) of subsection (c)(1)(A)(iii) shall not exceed such individual’s wages, salaries, tips, and other employee compensation which are attributable to such individual’s employment by the employer referred to in such subclause.
(B) Self-employed individualsThe deduction allowed under subsection (a) for contributions as an eligible individual described in subclause (II) of subsection (c)(1)(A)(iii) shall not exceed such individual’s earned income (as defined in section 401(c)(1)) derived by the taxpayer from the trade or business with respect to which the high deductible health plan is established.
(C) Community property laws not to applyThe limitations under this paragraph shall be determined without regard to community property laws.
(5) Coordination with exclusion for employer contributionsNo deduction shall be allowed under this section for any amount paid for any taxable year to an Archer MSA of an individual if—(A) any amount is contributed to any Archer MSA of such individual for such year which is excludable from gross income under section 106(b), or
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