Scope of publication. . This publication formerly only covered medical savings accounts (MSAs). The publication has been expanded to include information on health savings accounts and other tax-favored health plans.

Health savings accounts. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 authorized the establishment of new health savings accounts effective January 1, 2004. These accounts are similar to Archer Medical Savings Accounts in that they permit eligible individuals to save for, and pay, health care expenses on a tax-free basis.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Various employer-sponsored programs are designed to give employees tax advantages to offset health care costs. These plans are also generally available to self-employed individuals. This publication explains the following programs.

An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Contributions, other than the employer contributions, are deductible on the eligible individual's return whether or not the individual itemizes deductions. Employer contributions are not included in income. Distributions from an HSA that are used to pay qualified medical expenses are not taxed.

An Archer MSA may receive contributions from an eligible individual and his or her employer, but not both in the same year. Contributions by the individual are deductible whether or not the individual itemizes deductions. Employer contributions are not included in income. Distributions from an MSA that are used to pay qualified medical expenses are not taxed.

A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is eligible for Medicare. No Medicare Advantage MSAs have been established as of the revision date of this publication.

A health FSA may receive contributions from an eligible individual. Employers may also contribute. Contributions are not includible in income. Reimbursements from an FSA that are used to pay qualified medical expenses are not taxed.

An HRA must receive contributions from the employer only. Employees may not contribute. Contributions are not includible in income. Reimbursements from an HRA that are used to pay qualified medical expenses are not taxed.