IRS Instruction 8853 – Are you navigating the complexities of Archer Medical Savings Accounts (MSAs) or long-term care (LTC) insurance contracts? IRS Form 8853 is essential for reporting contributions, deductions, distributions, and taxable payments related to these accounts. This comprehensive guide breaks down the latest 2025 instructions for Form 8853, helping you understand filing requirements, tax implications, and how to avoid penalties. Whether you’re self-employed, managing an inherited MSA, or dealing with LTC benefits, we’ll cover everything you need to know based on official IRS guidelines.
What Is IRS Form 8853?
IRS Form 8853, titled “Archer MSAs and Long-Term Care Insurance Contracts,” is a tax form used to report specific health-related financial activities. It allows taxpayers to:
- Report contributions to Archer MSAs, including those made by employers.
- Calculate deductions for Archer MSA contributions.
- Report distributions from Archer MSAs or Medicare Advantage MSAs.
- Document taxable payments from LTC insurance contracts.
- Report taxable accelerated death benefits from life insurance policies.
Archer MSAs are tax-exempt trusts or custodial accounts set up with U.S. financial institutions, such as banks or insurance companies, to save for medical expenses. They were more common before Health Savings Accounts (HSAs) largely replaced them, but existing accounts established before 2008 can still be used. Medicare Advantage MSAs are similar but tied to Medicare plans.
The form is attached to your Form 1040, 1040-SR, or 1040-NR. For the 2025 tax year, the instructions were updated on December 19, 2025, with no major recent developments noted by the IRS.
Who Needs to File Form 8853?
You must file Form 8853 if any of the following apply:
- You (or your employer) made contributions to an Archer MSA during the tax year.
- You received distributions from an Archer MSA or Medicare Advantage MSA.
- You inherited an Archer MSA or Medicare Advantage MSA.
- You received taxable payments from an LTC insurance contract.
- You received taxable accelerated death benefits from a life insurance policy.
Even if you’re filing jointly, both spouses may need to report separately if each has an MSA. Note that not all LTC payments are taxable—qualified benefits may be excluded, but you’ll still report them on Form 8853 to calculate any taxable portion.
Eligibility for Archer MSAs is limited. They are primarily for self-employed individuals or employees of small businesses (50 or fewer employees) with high-deductible health plans (HDHPs). You cannot have other health coverage, except for specific types like dental, vision, disability, or LTC insurance.
Understanding Archer MSAs: Contributions, Deductions, and Distributions
Section A: Archer MSAs
Section A of Form 8853 handles Archer MSAs. Here’s a step-by-step overview:
- Contributions and Deductions (Lines 1-5):
- Report total contributions (Line 1).
- Enter employer contributions (Line 2), which are excluded from your income.
- Calculate your deduction limit based on your HDHP coverage (Line 3). For 2025, limits vary by self-only or family coverage—refer to IRS Publication 969 for exact figures.
- Subtract employer contributions to find your allowable deduction (Line 5), which reduces your taxable income.
- Distributions (Lines 6-9):
- Report total distributions (Line 6a) from Form 1099-SA.
- Exclude qualified medical expenses (Line 6b).
- Calculate taxable distributions (Line 7). Non-qualified withdrawals are subject to income tax and a 20% additional tax (Line 8), unless exceptions apply (e.g., death or disability).
If you’re filing jointly and both spouses have MSAs, use the SSN shown first on your return.
Tax Advantages of Archer MSAs
Contributions are deductible (or excluded if employer-made), earnings grow tax-free, and qualified distributions for medical expenses (e.g., doctor visits, prescriptions, orthodontia, physical therapy) are tax-free. However, non-medical withdrawals trigger taxes and penalties.
Medicare Advantage MSAs: Section B
Section B is for Medicare Advantage MSAs, which are similar to Archer MSAs but for Medicare enrollees. Report:
- Total distributions (Line 10a).
- Qualified medical expenses (Line 10b).
- Taxable amount (Line 11).
- Additional 50% tax on non-qualified distributions (Line 12), which is higher due to Medicare rules.
These accounts are funded solely by Medicare, not personal contributions.
Long-Term Care Insurance Contracts: Section C
Section C addresses LTC insurance and accelerated death benefits.
Key Filing Requirements
- If you received payments from LTC insurance or accelerated death benefits, report them here.
- Enter gross payments (Line 14) from Form 1099-LTC.
- Calculate excludable amounts based on per diem or actual costs (Lines 15-20).
- Determine taxable benefits (Line 21), which may be added to your income.
Qualified LTC benefits are generally tax-free up to certain limits (e.g., per diem maximums adjusted annually for inflation). Use Form 8853 to claim exclusions for per diem accelerated death benefits.
Tax Implications of LTC Payments
Payments for qualified long-term care services (e.g., nursing home care, in-home nursing) can be excluded, but reimbursements exceeding actual costs may be taxable. Premiums for LTC insurance may also be deductible as medical expenses on Schedule A, subject to age-based limits.
Penalties and Common Mistakes to Avoid
- Excess Contributions: Subject to a 6% excise tax via Form 5329.
- Non-Qualified Distributions: 20% additional tax for Archer MSAs (50% for Medicare Advantage).
- Late Filing: Could result in IRS penalties.
- Common errors include failing to report employer contributions or miscalculating excludable LTC amounts.
Always double-check against IRS Publication 969 and consult a tax professional for complex situations.
How to File Form 8853?
- Gather documents: Form 1099-SA (for MSA distributions), Form 1099-LTC (for LTC payments), W-2 (for employer contributions).
- Complete the relevant sections based on your activities.
- Attach to your 1040-series return and e-file if possible.
- Download the latest form and instructions from IRS.gov/Form8853.
For a walkthrough, resources like TurboTax or TaxAct can guide you through the process.
Related IRS Resources and Forms
| Resource | Description |
|---|---|
| Publication 969 | Health Savings Accounts and Other Tax-Favored Health Plans |
| Publication 502 | Medical and Dental Expenses (for LTC deductions) |
| Form 1099-SA | Distributions from MSAs |
| Form 1099-LTC | Long-Term Care and Accelerated Death Benefits |
| Form 5329 | Additional Taxes on Qualified Plans |
These publications provide deeper insights into eligibility and calculations.
Final Tips for 2025 Tax Filing
Stay updated via IRS.gov, as tax laws can change. If you’re transitioning from an Archer MSA to an HSA, note that rollovers are allowed but must be reported. Proper filing of Form 8853 ensures you maximize tax benefits while complying with IRS rules. If in doubt, seek advice from a certified tax advisor to avoid underpayment or overpayment issues.
This guide is based on the most current IRS information as of February 2026. For personalized advice, visit IRS.gov or consult a professional.