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Medical-Related Deductions

Learn more about medical related deductions.

Tax Treatment of Health Savings Account (HSA)

Health Savings Accounts (HSAs) are designed to help individuals enrolled in high-deductible health plans save for future qualified medical and retiree health expenses on a tax-free basis.

Massachusetts conforms to the federal deduction allowed to individuals for contributions to an HSA under Internal Revenue Code (“Code”) § 223(a) as currently in effect. The deduction is subject to limitations and is adjusted annually for inflation.

For calendar year 2022, the annual contribution limit to an HSA is $3,650 for those enrolled in a qualifying individual plan or $7,300 for those enrolled in a qualifying family plan. IRS Rev. Proc. 2021-25.  For calendar year 2023, the annual contribution limit is $3,850 for those enrolled in a qualifying individual plan, and $7,750 for those enrolled in a qualifying family plan. IRS Rev. Proc. 2022-24. 

Massachusetts also conforms to the federal exclusion from gross income of distributions from an HSA to pay for qualified medical expenses under Code § 223(f) as currently in effect.  Generally, qualified medical expenses are the costs, not covered by insurance, of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body.  For 2020 and later tax years, amounts paid for over-the-counter medicine (whether or not prescribed) and menstrual care products are considered qualified medical expenses.  Before the 2020 tax year, a prescription was generally required for an expense to qualify.  Go to IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans and IRS Publication 502 (2022), Medical and Dental Expenses. 

Massachusetts also conforms to the federal treatment of the earnings in an HSA account and, as a result, such earnings accrue on a tax-free basis.

Individuals Age 55 or Older

The annual contribution limitations are increased for individuals who are age 55 or older by the end of the calendar year and are not enrolled in Medicare. For 2009 and later tax years, these individuals may annually contribute an additional $1,000 to an HSA. 

For example, in tax year 2023, the contribution limits to an HSA for a qualifying individual age 55 or older are:

  • $4,850 for those enrolled in an individual plan (the contribution limit for individual coverage ($3,850) plus the additional contribution of $1,000)  
  • $8,750 for those enrolled in a family plan (the contribution limit for family coverage ($7,750) plus the additional contribution of $1,000)  

Tax Treatment of Medical Savings Accounts (Archer MSAs)

Archer MSAs were created to help self-employed individuals and employees of certain small employers meet medical care costs for themselves as well as for their spouses and dependents.

Massachusetts adopts the federal deduction allowed to individuals with high deductible health plans (HDHP) for contributions to Archer MSAs under Code § 220 as in effect on January 1, 2022. In addition, employer contributions made on behalf of the employee are excludable from the employee's gross income.  In general, an employee or employer can contribute up to 75% of the annual deductible of a HDHP (65% for individual plans) to an Archer MSA. If an employer contributes to an Archer MSA, the employee cannot make deductible contributions in the same year.  Go to About IRS Form 8853, Archer MSAs and Long-Term Care Insurance Contracts.

Massachusetts also adopts the federal exclusion from gross income of distributions from an Archer MSA to pay for qualified medical expenses under Code § 220(f) as in effect on January 1, 2022.  Generally, qualified medical expenses are the costs, not covered by insurance, of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body.  For 2022 and later tax years, for Massachusetts tax purposes, amounts paid for over-the-counter medicine (whether or not prescribed) and menstrual care products are considered qualified medical expenses.  Before the 2022 tax year, a prescription was generally required for an expense to qualify for Massachusetts tax purposes.  For federal tax purposes, the removal of the prescription requirement took effect in 2020.  Go to IRS Publication 969 (2022), Health Savings Accounts and Other Tax-Favored Health Plans and IRS Publication 502 (2022), Medical and Dental Expenses.

Massachusetts adopts the federal treatment of the earnings in an Archer MSA account and, as a result, such earnings accrue on a tax-free basis.

Beginning with tax year 2022, the Massachusetts tax benefits described in this section generally apply to Archer MSAs established before 2008.  For tax years prior to 2022, the Massachusetts tax benefits generally applied to Archer MSAs established before 2006.  Go to TIR 07-4: Issues Concerning the Tax Relief and Health Care Act of 2006.

Self-Employed Health Insurance Deduction

To the extent allowed under Code § 162(l) as currently in effect, self-employed persons may deduct from Massachusetts gross income amounts paid during the taxable year for health insurance for:

  • Themselves
  • Their spouses
  • Dependents
  • Children who are under age 27 at the end of the tax year

For the purposes of this deduction, a self-employed person is defined by Code § 401(c)(1) as currently in effect and includes a general partner (or a limited partner receiving guaranteed payments) or person who receives wages from an S corporation in which that person is more than a 2% shareholder.  Go to IRS Publication 502, Medical and Dental Expenses.

The deduction is limited to the taxpayer's annual earned income derived from the trade or business for which the insurance plan was established.

Subsidized Health Plans – Limitation on Self-Employed Health Insurance Deduction

This deduction may not be taken during any calendar month that a self-employed taxpayer is eligible to participate in any subsidized health plan maintained by:

  • Any employer of the taxpayer
    • Example: If a self-employed taxpayer has a second job, the taxpayer may not deduct amounts paid for health insurance coverage obtained as a self-employed individual for any calendar month when the taxpayer had alternative subsidized health insurance available through the second job.
  • Employer of the taxpayer’s spouse, dependent, or child under the age of 27 at the end of the tax year
    • Example: If a self-employed taxpayer was eligible to participate in a subsidized health plan maintained by his wife's employer from June 30 through December 31, then he cannot deduct amounts paid for health insurance coverage for June through December.

Medical Expense Deduction

Under G.L. c. 62, § 3.B(b)(4), taxpayers who itemize their deductions on their federal income tax returns may deduct from Massachusetts adjusted gross income an amount equal to the deduction allowed under Code § 213 currently in effect for qualifying medical expenses that exceed 7.5% of their federal adjusted gross income.  Go to TIR 22-2: Massachusetts Tax Implications of Selected Provisions of the Federal Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021.

Human Organ Donation Deduction

Individuals who donate organs to other persons for human organ transplantation may deduct an amount equal to the following expenses incurred and related to the organ donation:

  • Travel expenses
  • Lodging expenses and
  • Lost wages not to exceed $10,000

“Human organ” means all or parts of:

  • Human bone marrow
  • Liver
  • Pancreas
  • Kidney
  • Intestine or
  • Lung

Part-year and nonresidents are not eligible to claim this deduction.  Go to TIR 11-6: Tax Changes Contained in the Fiscal Year 2012 Budget.

Additional resources

Massachusetts References

Federal References

 

Page updated: June 9, 2023

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