[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.105-2]

[Page 445]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.105-2  Amounts expended for medical care.

    Section 105(b) provides an exclusion from gross income with respect 
to the amounts referred to in section 105(a) (see Sec. 1.105-1) which 
are paid, directly or indirectly, to the taxpayer to reimburse him for 
expenses incurred for the medical care (as defined in section 213(e)) of 
the taxpayer, his spouse, and his dependents (as defined in section 
152). However, the exclusion does not apply to amounts which are 
attributable to (and not in excess of) deductions allowed under section 
213 (relating to medical, etc., expenses) for any prior taxable year. 
See section 213 and the regulations thereunder. Section 105(b) applies 
only to amounts which are paid specifically to reimburse the taxpayer 
for expenses incurred by him for the prescribed medical care. Thus, 
section 105(b) does not apply to amounts which the taxpayer would be 
entitled to receive irrespective of whether or not he incurs expenses 
for medical care. For example, if under a wage continuation plan the 
taxpayer is entitled to regular wages during a period of absence from 
work due to sickness or injury, amounts received under such plan are not 
excludable from his gross income under section 105(b) even though the 
taxpayer may have incurred medical expenses during the period of 
illness. Such amounts may, however, be excludable from his gross income 
under section 105(d). See Sec. 1.105-4. If the amounts are paid to the 
taxpayer solely to reimburse him for expenses which he incurred for the 
prescribed medical care, section 105(b) is applicable even though such 
amounts are paid without proof of the amount of the actual expenses 
incurred by the taxpayer, but section 105(b) is not applicable to the 
extent that such amounts exceed the amount of the actual expenses for 
such medical care. If the taxpayer incurs an obligation for medical 
care, payment to the obligee in discharge of such obligation shall 
constitute indirect payment to the taxpayer as reimbursement for medical 
care. Similarly, payment to or on behalf of the taxpayer's spouse or 
dependents shall constitute indirect payment to the taxpayer.