In most situations, the entire amount received from a personal physical injury settlement is non-taxable. Consequently, your Medicare Set-Aside (MSA) funds, as part of that settlement, are also not taxed when you initially receive them.
Tax Responsibilities for Interest on MSA Funds
The injured party must pay taxes on any interest earned from their MSA funds. Generally, if the interest earned exceeds $10, the bank will issue a 1099-INT form to the injured party for use in their tax return. According to Medicare's guidelines, taxes on interest income can be paid from the MSA account itself.
Additional Tax Considerations
- Interest income from MSA funds is taxable.
- Ensure to use your 1099-INT form provided by the bank during tax filing.
For any intricate details regarding taxation and Medicare guidelines, consider consulting a tax professional or referring to the IRS website on taxable income.
