To determine your Montana adjusted gross income, you can subtract the amounts that you deposited into a Montana medical care savings account, up to $3,000 of contributions plus interest or other earnings on these funds annually. Please don't confuse this Montana MSA with the federal health savings account (HSA) that is already deducted from your income--you are allowed to participate in both programs.
If you're Married Filing Jointly with your spouse or Married Filing Separately--Same Form, both of you can qualify for your own Montana MSA and you each can exclude up to $3,000 plus interest or other earnings on this account annually.
To qualify for this exclusion, you'll need to establish a separate account that is owned by you alone and isn't jointly held with your spouse or any other individuals. In addition, you can't mix other funds with this account. Once these funds are excluded from Montana adjusted gross income, they can be withdrawn only for the payment of qualified medical expenses for you, your spouse or your qualified dependent. Any of these funds withdrawn for other purposes are subject to tax in the year that they are withdrawn and they also may be subject to a 10% penalty if they are withdrawn on any day other than the last business day of the year.
For further instructions on the Montana medical care savings account, see Montana Form MSA . When you claim this exclusion, you'll need to include a copy of Form MSA with your Montana tax return.