Who qualifies to claim the Medical Savings Account exemption?

If you or your spouse are enrolled in a New Mexico Medical Care Savings Account (NMMSA) established by an employer, and during 2014 you made or received contributions to the account or made or received distributions from the account, you may be entitled to claim a New Mexico medical care savings account exemption.

An NMMSA is a tax-exempt trust or custodial account set up by a self-employed individual or a small employer that maintains a high deductible individual or family health plan. The funds from the NMMSA are used to pay the employee's unreimbursed medical care expenses. To qualify for the exemption, the qualified contributions or distributions may not be excluded, exempted, or deducted from federal taxable income.

Principal contributed to an NMMSA, interest earned on an NMMSA, money paid for eligible medical expenses from funds in an NMMSA, or money advanced to the employee by the employer for eligible medical expenses pursuant to the Medical Care Savings Account Act are exempt from New Mexico income tax.

Caution: Generally, qualified contributions and earnings are excluded, exempted, or deducted from federal adjusted gross income and distributions paid for eligible medical expenses are excluded, exempted, or deducted from federal taxable income. You may not claim the exemption from New Mexico taxable income if your qualified contribution or distribution is excluded, exempted, or deducted from federal taxable income.

Do not include excess contributions, unqualified distributions, or money rolled over into another MSA.

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