IRS Stats Indicate HSAs Becoming the Medical Spending Account of Choice

July 8, 2008 ( - The latest IRS statistics indicate that tax-preferred health savings accounts (HSAs) are becoming the health care spending accounts of choice by Americans.

A press release from the Grant Thornton National Tax Office said its analysis of the most recent IRS data finds the use of HSAs, created by Medicare reform legislation in 2003, has expanded quickly since 2004 while participation in medical savings accounts (MSAs) has dropped. HSA deductions cost the government $868 million in 2006, up from $511 million in 2005, while deductions for MSAs dropped from $41 million to $35 million, according to the release.

Grant Thornton noted that the lack of more severe restrictions sets HSAs apart from other tax-preferred vehicles. MSAs are available only to small business employees and the self-employed, and unused flexible spending account (FSA) contributions are lost at the end of the year. Unused HSA balances can be carried over from year to year and withdrawn without penalty at retirement.

Taxpayer statistics on the IRS Website are at .