You report the excise tax on line 53 of your Form 1040. Exceptions to excise tax. There is no excise tax if you are disabled, age 65 or older, or die during the year. Death of the MSA holder. What happens to that MSA when you die depends on whom you designate as the beneficiary.
Spouse is the designated beneficiary.
If your spouse is the designated beneficiary of your MSA, it will be treated as your spouse's MSA after your death. Spouse is not the designated beneficiary. No designated beneficiary. If you have no beneficiary, the fair market value of the MSA will be included on your final income tax return after your death. Examples include amounts paid for doctors' fees, prescription medicines, and necessary hospital services.