[Code of Federal Regulations] [Title 26, Volume 1] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR1.213-1] [Page 315-327] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) PART 1_INCOME TAXES--Table of Contents Sec. 1.213-1 Medical, dental, etc., expenses. (a) Allowance of deduction. (1) Section 213 permits a deduction of payments for certain medical expenses (including expenses for medicine and drugs). Except as provided in paragraph (d) of this section (relating to special rule for decedents) a deduction is allowable only to individuals and only with respect to medical expenses actually paid during the taxable year, regardless of when the incident or event which occasioned the expenses occurred and regardless of the method of accounting employed by the taxpayer in making his income tax return. Thus, if the medical expenses are incurred but not paid during the taxable year, no deduction for such expenses shall be allowed for such year. (2) Except as provided in subparagraphs (4)(i) and (5)(i) of this paragraph, only such medical expenses (including the allowable expenses for medicine and drugs) are deductible as exceed 3 percent of the adjusted gross income for the taxable year. For taxable years beginning after December 31, 1966, the amounts paid during the taxable year for insurance that constitute expenses paid for medical care shall, for purposes of computing total medical expenses, be reduced by the amount determined under subparagraph (5)(i) of this paragraph. For the amounts paid during the taxable year for medicine and drugs which may be taken into account in computing total medical expenses, see paragraph (b) of this section. For the maximum deduction allowable under section 213 in the case of certain taxable years, see paragraph (c) of this section. As to what constitutes ``adjusted gross income'', see section 62 and the regulations thereunder. (3)(i) For medical expenses paid (including expenses paid for medicine and drugs) to be deductible, they must be for medical care of the taxpayer, his spouse, or a dependent of the taxpayer and not be compensated for by insurance or otherwise. Expenses paid for the medical care of a dependent, as defined in section 152 and the regulations thereunder, are deductible under this section even though the dependent has gross income equal to or in excess of the amount determined pursuant to Sec. 1.151-2 applicable to the calendar year in which the taxable year of the taxpayer begins. Where such expenses are paid by two or more persons and the conditions of section 152(c) and the regulations thereunder are met, the medical expenses are deductible only by the person designated in the multiple [[Page 316]] support agreement filed by such persons and such deduction is limited to the amount of medical expenses paid by such person. (ii) An amount excluded from gross income under section 105 (c) or (d) (relating to amounts received under accident and health plans) and the regulations thereunder shall not constitute compensation for expenses paid for medical care. Exclusion of such amounts from gross income will not affect the treatment of expenses paid for medical care. (iii) The application of the rule allowing a deduction for medical expenses to the extent not compensated for by insurance or otherwise may be illustrated by the following example in which it is assumed that neither the taxpayer nor his wife has attained the age of 65: Example. Taxpayer H, married to W and having one dependent child, had adjusted gross income for 1956 of $3,000. During 1956 he paid $300 for medical care, of which $100 was for treatment of his dependent child and $200 for an operation on W which was performed in September 1955. In 1956 he received a payment of $50 for health insurance to cover a portion of the cost of W's operation performed during 1955. The deduction allowable under section 213 for the calendar year 1956, provided the taxpayer itemizes his deductions and does not compute his tax under section 3 by use of the tax table, is $160, computed as follows: Payments in 1956 for medical care............................ $300 Less: Amount of insurance received in 1956................... 50 ---------- Payments in 1956 for medical care not compensated for 250 during 1956............................................. Less: 3 percent of $3,000 (adjusted gross income)............ 90 ---------- Excess, allowable as a deduction for 1956................ 160 (4)(i) For taxable years beginning before January 1, 1967, where either the taxpayer or his spouse has attained the age of 65 before the close of the taxable year, the 3-percent limitation on the deduction for medical expenses does not apply with respect to expenses for medical care of the taxpayer or his spouse. Moreover, for taxable years beginning after December 31, 1959, and before January 1, 1967, the 3- percent limitation on the deduction for medical expenses does not apply to amounts paid for the medical care of a dependent (as defined in sec. 152) who is the mother or father of the taxpayer or his spouse and who has attained the age of 65 before the close of the taxpayer's taxable year. For taxable years beginning before January 1, 1964, and for taxable years beginning after December 31, 1966, all amounts paid by the taxpayer for medicine and drugs are subject to the 1-percent limitation provided by section 213(b). For taxable years beginning after December 31, 1963, and before January 1, 1967, the 1-percent limitation provided by section 213(b) does not apply, under certain circumstances, to amounts paid by the taxpayer for medicine and drugs for the taxpayer and his spouse or for a dependent (as defined in sec. 152) who is the mother or father of the taxpayer or of his spouse. (For additional provisions relating to the 1-percent limitation with respect to medicine and drugs, see paragraph (b) of this section.) For taxable years beginning before January 1, 1967, whether or not the 3-percent or 1-percent limitation applies, the total medical expenses deductible under section 213 are subject to the limitations described in section 213(c) and paragraph (c) of this section and, where applicable, to the limitations described in section 213(g) and Sec. 1.213-2. (ii) The age of a taxpayer shall be determined as of the last day of his taxable year. In the event of the taxpayer's death, his taxable year shall end as of the date of his death. The age of a taxpayer's spouse shall be determined as of the last day of the taxpayer's taxable year, except that, if the spouse dies within such taxable year, her age shall be determined as of the date of her death. Likewise, the age of the taxpayer's dependent who is the mother or father of the taxpayer or of his spouse shall be determined as of the last day of the taxpayer's taxable year but not later than the date of death of such dependent. (iii) The application of subdivision (i) of this subparagraph may be illustrated by the following examples: Example 1. Taxpayer A, who attained the age of 65 on February 22, 1956, makes his return on the basis of the calendar year. During the year 1956, A had adjusted gross income of $8,000, and paid the following medical bills: (a) $560 (7 percent of adjusted gross income) for the medical care of himself and his spouse, and (b) $160 (2 percent of adjusted [[Page 317]] gross income) for the medical care of his dependent son. No part of these payments was for medicine and drugs nor compensated for by insurance or otherwise. The allowable deduction under section 213 for 1956 is $560, the full amount of the medical expenses for the taxpayer and his spouse. No deduction is allowable for the amount of $160 paid for medical care of the dependent son since the amount of such payment (determined without regard to the payments for the care of the taxpayer and his spouse) does not exceed 3 percent of adjusted gross income. Example 2. H and W, who have a dependent child, made a joint return for the calendar year 1956. H became 65 years of age on August 15, 1956. The adjusted gross income of H and W in 1956 was $40,000 and they paid in such year the following amounts for medical care: (a) $3,000 for the medical care of H; (b) $2,000 for the medical care of W; and (c) $3,000 for the medical care of the dependent child. No part of these payments was for medicine and drugs nor compensated for by insurance or otherwise. The allowable deduction under section 213 for medical expenses paid in 1956 is $6,800 computed as follows: Payments for medical care of H and W in 1956................. $5,000 Payments for medical care of the dependent in 1956 $3,000 ......... Less: 3 percent of $40,000 (adjusted gross income) 1,200 ......... -------- 1,800 ---------- Allowable deduction for 1956.................. ......... 6,800 Example 3. D and his wife, E, made a joint income tax return for the calendar year 1962, and reported adjusted gross income of $30,000. On December 13, 1962, D attained the age of 65. During the year 1962, D's father, F, who was 87 years of age, received over half of his support from, and was a dependent (as defined in section 152) of, D. However, D could not claim an exemption under section 151 for F because F had gross income from rents in 1962 of $800. D paid the following medical expenses in 1962, none of which were compensated for by insurance or otherwise: hospital and doctor bills for D and E, $6,500; hospital and doctor bills for F, $4,850; medicine and drugs for D and E, $225, and for F, $225. Since none of the medical expenses are subject to the 3-percent limitation, the amount of medical expenses to be taken into account (before computing the maximum deduction) is $11,500, computed as follows: Hospital and doctor bills--for D and E............ ......... $6,500 Hospital and doctor bills--for F.................. ......... 4,850 Medicine and drugs--for D and E................... $225 ......... Medicine and drugs--for F......................... $225 ......... ----------- Total medicine and drugs...................... 450 ......... Less: 1 percent of adjusted gross income ($30,000) 300 ......... ----------- Allowable expenses for medicine and drugs......... ......... $150 ---------- Total medical expenses taken into account..... ......... 11,500 Since an exemption cannot be claimed for F on the 1962 return of D and E, their deduction for medical expenses (assuming that section 213(g) does not apply) is limited to $10,000 for that year ($5,000 multiplied by the two exemptions allowed for D and E under section 151(b)). If these identical facts had occurred in a taxable year beginning before January 1, 1962, the medical expense deduction for D and E would, for such taxable year, be limited to $5,000 ($2,500 multiplied by the two exemptions allowed for D and E under section 151(b)). See paragraph (c) of this section. Example 4. Assume the same facts as in Example 3, except that D furnished the entire support of his father's twin sister, G, who had no gross income during 1962 and for whom D was entitled to a dependency exemption. In addition, D paid $4,800 to doctors and hospitals during 1962 for the medical care of G. No part of the $4,800 was for medicine and drugs, and no amount was compensated for by insurance or otherwise. For purposes of the maximum limitation under section 213(c), the maximum deduction for medical expenses on the 1962 return of D and E is limited to $15,000 ($5,000 multiplied by 3, the number of exemptions allowed under section 151, exclusive of the exemptions for old age or blindness). If these identical facts had occurred in a taxable year beginning before January 1, 1962, the medical expense deduction for D and E would, for such taxable year, be limited to $7,500 ($2,500 multiplied by the three exemptions allowed under section 151, exclusive of the exemptions for old age or blindness). The medical expenses to be taken into account by D and E for 1962 and the maximum deductions allowable for such expenses are $15,400 and $15,000, respectively, computed as follows: Medical expenses per Example 3.................... ......... $11,500 Add: Expenses paid for G.......................... $4,800 ......... Less: 3 percent of adjusted gross income ($30,000) 900 ......... -------- 3,900 ---------- Total medical expenses taken into account................ 15,400 Maximum deduction for 1962 ($5,000 multiplied by 3 15,000 exemptions)................................................. ---------- Medical expenses not deductible.............................. 400 Example 5. Assume that the facts set forth in Example 3 had occurred in respect of the calendar year 1964 rather than the calendar year 1962. Since both D and his father, F, had attained the age of 65 before the close of the taxable year, the 1-percent limitation does not apply to the amounts paid for medicine and drugs for D, E, and F. Accordingly, the total medical expenses taken into account [[Page 318]] by D and E for 1964 would be $11,800 (rather than $11,500 as in Example 3) computed as follows: Hospital and doctor bills--for D and E...................... $6,500 Hospital and doctor bills--for F............................ 4,350 Medicine and drugs--for D and E............................. 225 Medicine and drugs--for F................................... 225 ----------- Total medical expenses taken into account................. 11,800 (5)(i) For taxable years beginning after December 31, 1966, there may be deducted without regard to the 3-percent limitation the lesser of--(a) One-half of the amounts paid during the taxable year for insurance which constitute expenses for medical care for the taxpayer, his spouse, and dependents; or (b) $150. (ii) The application of subdivision (i) of this subparagraph may be illustrated by the following example: Example. H and W made a joint return for the calendar year 1967. The adjusted gross income of H and W for 1967 was $10,000 and they paid in such year $370 for medical care of which amount $350 was paid for insurance which constitutes medical care for H and W. No part of the payment was for medicine and drugs or was compensated for by insurance or otherwise. The allowable deduction under section 213 for medical expenses paid in 1967 is $150, computed as follows: (1) Lesser of $175 (one-half of amounts paid for insurance) or $150 $150........................................................... (2) Payments for medical care................... $370 ...... ...... (3) Less line 1................................. 150 ...... ...... -------- (4) Medical expenses to be taken into account under 3- $220 ...... percent limitation (line 2 minus line 3)............... (5) Less: 3 percent of $10,000 (adjusted gross income).. 300 ...... -------- (6) Excess allowable as a deduction for 1967 (excess of line 4 0 over line 5)................................................... ------- (7) Allowable medical expense deduction for 1967 (line 1 plus $150 line 6)........................................................ (b) Limitation with respect to medicine and drugs--(1) Taxable years beginning before January 1, 1964. (i) Amounts paid during taxable years beginning before January 1, 1964, for medicine and drugs are to be taken into account in computing the allowable deduction for medical expenses paid during the taxable year only to the extent that the aggregate of such amounts exceeds 1 percent of the adjusted gross income for the taxable year. Thus, if the aggregate of the amounts paid for medicine and drugs exceeds 1 percent of adjusted gross income, the excess is added to other medical expenses for the purpose of computing the medical expense deduction. The application of this subdivision may be illustrated by the following example: Example. The taxpayer, a single individual with no dependents, had an adjusted gross income of $6,000 for the calendar year 1956. During 1956, he paid a doctor $300 for medical services, a hospital $100 for hospital care, and also spent $100 for medicine and drugs. These payments were not compensated for by insurance or otherwise. The deduction allowable under section 213 for the calendar year 1956 is $260, computed as follows: Payments for medical care in 1956: Doctor.......................................................... $300 Hospital........................................................ 100 Medicine and drugs...................................... $100 ...... Less: 1 percent of $6,000 (adjusted gross income)....... 60 40 --------------- Total medical expenses taken into account..................... 440 Less: 3 percent of $6,000 (adjusted gross income)............... 180 ------- Allowable deduction for 1956.................................... 260 (ii) For taxable years beginning before January 1, 1964, the 1- percent limitation is applicable to all amounts paid by a taxpayer during the taxable year for medicine and drugs. Moreover, this limitation applies regardless of the fact that the amounts paid are for medicine and drugs for the taxpayer, his spouse, or dependent parent (the mother or father of the taxpayer or of his spouse) who has attained the age of 65 before the close of the taxable year. In a case where either a taxpayer or his spouse has attained the age of 65 and the taxpayer pays an amount in excess of 1 percent of adjusted gross income for medicine and drugs for himself, his spouse, and his dependents, it is necessary to apportion the 1 percent of adjusted gross income (the portion which is not taken into account as expenses paid for medical care) between the taxpayer and his spouse on the one hand and his dependents on the other. The part of the 1 percent allocable to the taxpayer and his spouse is an amount which bears the same ratio to 1 percent of his adjusted gross income which the amount paid for medicine and drugs for the taxpayer and his spouse bears to the total amount paid for medicine and drugs for the taxpayer, his spouse, and his dependents. The balance of the 1 percent shall be allocated to his dependents. The amount paid for medicine and drugs in excess of the allocated part of the 1 percent shall be [[Page 319]] taken into account as payments for medical care for the taxpayer and his spouse on the one hand and his dependents on the other, respectively. A similar apportionment must be made in the case of a dependent parent (65 years of age or over) of the taxpayer or his spouse. The application of this subdivision (ii) may be illustrated by the following example: Example. H and W, who have a dependent child, made a joint return for the calendar year 1956. H became 65 years of age on September 15, 1956. The adjusted gross income of H and W for 1956 is $10,000. During the year, H and W paid the following amounts for medical care: (i) $1,000 for doctors and hospital expenses and $180 for medicine and drugs for themselves; and (ii) $500 for doctors and hospital expenses and $140 for medicine and drugs for the dependent child. These payments were not compensated for by insurance or otherwise. The deduction allowable under section 213(a)(2) for medical expenses paid in 1956 is $1,420, computed as follows: H and W: Payments for doctors and hospital. .......... .......... $1,000.00 Payments for medicine and drugs... .......... $180.00 .......... Less: Limitation for medicine and .......... 56.25 123.75 drugs (see computation below).... ------------- Medical expenses for H and W to .......... .......... 1,123.75 be taken into account.......... Dependent: Payments for doctors and hospital. .......... 500.00 .......... Payments for medicine and drugs. $140.00 .......... .......... Less: Limitation for medicine 43.75 96.25 .......... and drugs (see computation below)......................... ------------------------ Total medical expenses.......... .......... 596.25 .......... Less: 3 percent of $10,000 .......... 300.00 .......... (adjusted gross income).......... ------------ Medical expenses for the dependent .......... .......... 296.25 to be taken into account......... Allowable deductions for 1956... .......... .......... 1,420.00 ----------- Payments for medicine and drugs: H and W........................... .......... .......... 180.00 Dependent......................... .......... .......... 140.00 ----------- Total payments.................. .......... .......... 320.00 Less: 1 percent of $10,000 .......... .......... 100.00 (adjusted gross income).......... Payments to be taken into account. .......... .......... 20.00 ----------- Allocation of 1-percent exclusion: H and W (180/320x$100)............ .......... .......... 56.25 Dependent (140/320x$100).......... .......... .......... 43.75 ----------- Total........................... .......... .......... 100.00 (2) Taxable years beginning after December 31, 1963. (i) Except as otherwise provided in subdivision (ii) of this subparagraph, amounts paid during taxable years beginning after December 31, 1963, for medicine and drugs are to be taken into account in computing the allowable deduction for medical expenses paid during the taxable year only to the extent that the aggregate of such amounts exceeds 1 percent of the adjusted gross income for the taxable year. Thus, if the aggregate of the amounts paid for medicine and drugs which are subject to the 1-percent limitation exceeds 1 percent of adjusted gross income, the excess is added to other medical expenses for the purpose of computing the medical expense deduction. (ii) The 1-percent limitation provided by section 213 does not apply to amounts paid by a taxpayer during a taxable year beginning after December 31, 1963, and before January 1, 1967, for medicine and drugs for the medical care of the taxpayer and his spouse if either has attained the age of 65 before the close of the taxable year. Moreover, for taxable years beginning after December 31, 1963, and before January 1, 1967, the 1-percent limitation with respect to medicine and drugs does not apply to amounts paid for the medical care of a dependent (as defined in sec. 152) who is the mother or father of the taxpayer or of his spouse and who has attained the age of 65 before the close of the taxpayer's taxable year. Amounts paid for medicine and drugs which are not subject to the limitation [[Page 320]] on medicine and drugs are added to other medical expenses of a taxpayer and his spouse or the dependent (as the case may be) for the purpose of computing the medical expense deduction. (iii) The application of this subparagraph may be illustrated by the following examples: Example 1. H and W, who have a dependent child, C, were both under 65 years of age at the close of the calendar year 1964 and made a joint return for that calendar year. During the year 1964, H's mother, M, attained the age of 65, and was a dependent (as defined in section 152) of H. The adjusted gross income of H and W in 1964 was $12,000. During 1964 H and W paid the following amounts for medical care: (i) $600 for doctors and hospital expenses and $120 for medicine and drugs for themselves; (ii) $350 for doctors and hospital expenses and $60 for medicine and drugs for C; and (iii) $400 for doctors and hospital expenses and $100 for medicine and drugs for M. These payments were not compensated for by insurance or otherwise. The deduction allowable under section 213(a) (1) for medical expenses paid in 1964 is $1,150, computed as follows: H, W, and C: Payments for doctors and hospital..................... $950 Payments for medicine and drugs............... $180 Less: 1 percent of $12,000 (adjusted gross 120 60 income)...................................... ---------------- Total medical expenses.............................. 1,010 Less: 3 percent of $12,000 (adjusted gross income).... 360 -------- Medical expenses of H, W, and C to be taken into account.... $650 M: Payments for doctors and hospitals.................... 400 Payments for medicine and drugs....................... 100 -------- Medical expenses of M to be taken into account.............. 500 ------- Allowable deduction for 1964.................................. 1,150 Example 2. H and W, who have a dependent child, C, made a joint return for the calendar year 1964, and reported adjusted gross income of $12,000. H became 65 years of age on January 23, 1964. F, the 87 year old father of W, was a dependent of H. During 1964, H and W paid the following amounts for medical care: (i) $400 for doctors and hospital expenses and $75 for medicine and drugs for H; (ii) $200 for doctors and hospital expenses and $100 for medicine and drugs for W; (iii) $200 for doctors and hospital expenses and $175 for medicine and drugs for C; and (iv) $700 for doctors and hospital expenses and $150 for medicine and drugs for F. These payments were not compensated for by insurance or otherwise. The deduction allowable under section 213(a) (2) for medical expenses paid in 1964 is $1,625, computed as follows: H and W: Payments for doctors and hospital..................... $600 Payments for medicine and drugs....................... 175 -------- Medical expenses for H and W to be taken into ...... $775 account............................................ F: Payments for doctors and hospital..................... 700 Payments for medicine and drugs....................... 150 -------- Medical expenses for F to be taken into account..... ...... 850 C: Payments for doctors and hospital............. ...... 200 Payments for medicine and drugs............... $175 Less: 1 percent of $12,000 (adjusted gross 120 55 income)...................................... ---------------- Total medical expenses...................... ...... 255 Less: 3 percent of $12,000 (adjusted gross income).... 360 -------- Medical expenses for C to be taken into account............. 0 ------- Allowable deduction for 1964................................ 1,625 Example 3. Assume the same facts as example (2) except that the calendar year of the return is 1967 and the amounts paid for medical care were paid during 1967. The deduction allowable under section 213(a) for medical expenses paid in 1967 is $1,520, computed as follows: Payments for doctors and hospitals: H................................... $400 W................................... 200 C................................... 200 F................................... 700 ------ ..... $1,500 Payments for medicine and drugs: H................................... 75 W................................... 100 C................................... 175 F................................... 150 ---- $500 Less: 1 percent of $12,000 (adjusted gross 120 380 income)....................................... ---------------- Medical expenses to be taken into account...... ..... ....... $1,880 Less: 3 percent of $12,000 (adjusted gross ..... ....... 360 income)....................................... -------- Allowable medical expense deduction for 1967... ..... ....... 1,520 (3) Definition of medicine and drugs. For definition of medicine and drugs, see paragraph (e) (2) of this section. (c) Maximum limitations. (1) For taxable years beginning after December 31, 1966, there shall be no maximum limitation on the amount of the deduction allowable for payment of medical expenses. [[Page 321]] (2) Except as provided in section 213(g) and Sec. 1.213-2 (relating to maximum limitations with respect to certain aged and disabled individuals for taxable years beginning before January 1, 1967), for taxable years beginning after December 31, 1961, and before January 1, 1967, the maximum deduction allowable for medical expenses paid in any one taxable year is the lesser of: (i) $5,000 multiplied by the number of exemptions allowed under section 151 (exclusive of exemptions allowed under section 151(c) for a taxpayer or spouse attaining the age of 65, or section 151(d) for a taxpayer who is blind or a spouse who is blind); (ii) $10,000, if the taxpayer is single, not the head of a household (as defined in section 1(b) (2)) and not a surviving spouse (as defined in section 2(b)), or is married and files a separate return; or (iii) $20,000 if the taxpayer is married and files a joint return with his spouse under section 6013, or is the head of a household (as defined in section 1(b) (2)), or a surviving spouse (as defined in section 2(b)). (3) The application of subparagraph (2) of this paragraph may be illustrated by the following example: Example. H and W made a joint return for the calendar year 1962 and were allowed five exemptions (exclusive of exemptions under sec. 151 (c) and (d)), one for each taxpayer and three for their dependents. The adjusted gross income of H and W in 1962 was $80,000. They paid during such year $26,000 for medical care, no part of which is compensated for by insurance or otherwise. The deduction allowable under section 213 for the calendar year 1962 is $20,000, computed as follows: Payments for medical care in 1962............................ $26,000 Less: 3 percent of $80,000 (adjusted gross income)........... 2,400 ---------- Excess of medical expenses in 1962 over 3 percent of adjusted 23,600 gross income................................................ Allowable deduction for 1962 ($5,000 multiplied by five 20,000 exemptions allowed under sec. 151 (b) and (e) but not in excess of $20,000).......................................... (4) Except as provided in section 213(g) and Sec. 1.213-2 (relating to certain aged and disabled individuals), for taxable years beginning before January 1, 1962, the maximum deduction allowable for medical expenses paid in any 1 taxable year is the lesser of: (i) $2,500 multiplied by the number of exemptions allowed under section 151 (exclusive of exemptions allowed under section 151(c) for a taxpayer or spouse attaining the age of 65, or section 151(d) for a taxpayer who is blind or a spouse who is blind); (ii) $5,000, if the taxpayer is single, not the head of a household (as defined in section 1(b) (2)) and not a surviving spouse (as defined in section 2(b)) or is married and files a separate return; or (iii) $10,000, if the taxpayer is married and files a joint return with his spouse under section 6013, or is head of a household (as defined in section 1(b) (2)), or a surviving spouse (as defined in section 2(b)). (5) For the maximum deduction allowable for taxable years beginning before January 1, 1967, if the taxpayer or his spouse is age 65 or over and is disabled, see Sec. 1.213-2. (d) Special rule for decedents. (1) For the purpose of section 213 (a), expenses for medical care of the taxpayer which are paid out of his estate during the 1-year period beginning with the day after the date of his death shall be treated as paid by the taxpayer at the time the medical services were rendered. However, no credit or refund of tax shall be allowed for any taxable year for which the statutory period for filing a claim has expired. See section 6511 and the regulations thereunder. (2) The rule prescribed in subparagraph (1) of this paragraph shall not apply where the amount so paid is allowable under section 2053 as a deduction in computing the taxable estate of the decedent unless there is filed in duplicate (i) a statement that such amount has not been allowed as a deduction under section 2053 in computing the taxable estate of the decedent and (ii) a waiver of the right to have such amount allowed at any time as a deduction under section 2053. The statement and waiver shall be filed with or for association with the return, amended return, or claim for credit or refund for the decedent for any taxable year for which such an amount is claimed as a deduction. (e) Definitions--(1) General. (i) The term medical care includes the diagnosis, cure, mitigation, treatment, or prevention of disease. Expenses paid for ``medical care'' shall include those paid for the purpose of affecting any structure or function of the body or for [[Page 322]] transportation primarily for and essential to medical care. See subparagraph (4) of this paragraph for provisions relating to medical insurance. (ii) Amounts paid for operations or treatments affecting any portion of the body, including obstetrical expenses and expenses of therapy or X-ray treatments, are deemed to be for the purpose of affecting any structure or function of the body and are therefore paid for medical care. Amounts expended for illegal operations or treatments are not deductible. Deductions for expenditures for medical care allowable under section 213 will be confined strictly to expenses incurred primarily for the prevention or alleviation of a physical or mental defect or illness. Thus, payments for the following are payments for medical care: hospital services, nursing services (including nurses' board where paid by the taxpayer), medical, laboratory, surgical, dental and other diagnostic and healing services, X-rays, medicine and drugs (as defined in subparagraph (2) of this paragraph, subject to the 1-percent limitation in paragraph (b) of this section), artificial teeth or limbs, and ambulance hire. However, an expenditure which is merely beneficial to the general health of an individual, such as an expenditure for a vacation, is not an expenditure for medical care. (iii) Capital expenditures are generally not deductible for Federal income tax purposes. See section 263 and the regulations thereunder. However, an expenditure which otherwise qualifies as a medical expense under section 213 shall not be disqualified merely because it is a capital expenditure. For purposes of section 213 and this paragraph, a capital expenditure made by the taxpayer may qualify as a medical expense, if it has as its primary purpose the medical care (as defined in subdivisions (i) and (ii) of this subparagraph) of the taxpayer, his spouse, or his dependent. Thus, a capital expenditure which is related only to the sick person and is not related to permanent improvement or betterment of property, if it otherwise qualifies as an expenditure for medical care, shall be deductible; for example, an expenditure for eye glasses, a seeing eye dog, artificial teeth and limbs, a wheel chair, crutches, an inclinator or an air conditioner which is detachable from the property and purchased only for the use of a sick person, etc. Moreover, a capital expenditure for permanent improvement or betterment of property which would not ordinarily be for the purpose of medical care (within the meaning of this paragraph) may, nevertheless, qualify as a medical expense to the extent that the expenditure exceeds the increase in the value of the related property, if the particular expenditure is related directly to medical care. Such a situation could arise, for example, where a taxpayer is advised by a physician to install an elevator in his residence so that the taxpayer's wife who is afflicted with heart disease will not be required to climb stairs. If the cost of installing the elevator is $1,000 and the increase in the value of the residence is determined to be only $700, the difference of $300, which is the amount in excess of the value enhancement, is deductible as a medical expense. If, however, by reason of this expenditure, it is determined that the value of the residence has not been increased, the entire cost of installing the elevator would qualify as a medical expense. Expenditures made for the operation or maintenance of a capital asset are likewise deductible medical expenses if they have as their primary purpose the medical care (as defined in subdivisions (i) and (ii) of this subparagraph) of the taxpayer, his spouse, or his dependent. Normally, if a capital expenditure qualifies as a medical expense, expenditures for the operation or maintenance of the capital asset would also qualify provided that the medical reason for the capital expenditure still exists. The entire amount of such operation and maintenance expenditures qualifies, even if none or only a portion of the original cost of the capital asset itself qualified. (iv) Expenses paid for transportation primarily for and essential to the rendition of the medical care are expenses paid for medical care. However, an amount allowable as a deduction for ``transportation primarily for and essential to medical care'' shall not include the cost of any meals and lodging [[Page 323]] while away from home receiving medical treatment. For example, if a doctor prescribes that a taxpayer go to a warm climate in order to alleviate a specific chronic ailment, the cost of meals and lodging while there would not be deductible. On the other hand, if the travel is undertaken merely for the general improvement of a taxpayer's health, neither the cost of transportation nor the cost of meals and lodging would be deductible. If a doctor prescribes an operation or other medical care, and the taxpayer chooses for purely personal considerations to travel to another locality (such as a resort area) for the operation or the other medical care, neither the cost of transportation nor the cost of meals and lodging (except where paid as part of a hospital bill) is deductible. (v) The cost of in-patient hospital care (including the cost of meals and lodging therein) is an expenditure for medical care. The extent to which expenses for care in an institution other than a hospital shall constitute medical care is primarily a question of fact which depends upon the condition of the individual and the nature of the services he receives (rather than the nature of the institution). A private establishment which is regularly engaged in providing the types of care or services outlined in this subdivision shall be considered an institution for purposes of the rules provided herein. In general, the following rules will be applied: (a) Where an individual is in an institution because his condition is such that the availability of medical care (as defined in subdivisions (i) and (ii) of this subparagraph) in such institution is a principal reason for his presence there, and meals and lodging are furnished as a necessary incident to such care, the entire cost of medical care and meals and lodging at the institution, which are furnished while the individual requires continual medical care, shall constitute an expense for medical care. For example, medical care includes the entire cost of institutional care for a person who is mentally ill and unsafe when left alone. While ordinary education is not medical care, the cost of medical care includes the cost of attending a special school for a mentally or physically handicapped individual, if his condition is such that the resources of the institution for alleviating such mental or physical handicap are a principal reason for his presence there. In such a case, the cost of attending such a special school will include the cost of meals and lodging, if supplied, and the cost of ordinary education furnished which is incidental to the special services furnished by the school. Thus, the cost of medical care includes the cost of attending a special school designed to compensate for or overcome a physical handicap, in order to qualify the individual for future normal education or for normal living, such as a school for the teaching of braille or lip reading. Similarly, the cost of care and supervision, or of treatment and training, of a mentally retarded or physically handicapped individual at an institution is within the meaning of the term medical care. (b) Where an individual is in an institution, and his condition is such that the availability of medical care in such institution is not a principal reason for his presence there, only that part of the cost of care in the institution as is attributable to medical care (as defined in subdivisions (i) and (ii) of this subparagraph) shall be considered as a cost of medical care; meals and lodging at the institution in such a case are not considered a cost of medical care for purposes of this section. For example, an individual is in a home for the aged for personal or family considerations and not because he requires medical or nursing attention. In such case, medical care consists only of that part of the cost for care in the home which is attributable to medical care or nursing attention furnished to him; his meals and lodging at the home are not considered a cost of medical care. (c) It is immaterial for purposes of this subdivision whether the medical care is furnished in a Federal or State institution or in a private institution. (vi) See section 262 and the regulations thereunder for disallowance of deduction for personal living, and family expenses not falling within the definition of medical care. (2) Medicine and drugs. The term medicine and drugs shall include only items [[Page 324]] which are legally procured and which are generally accepted as falling within the category of medicine and drugs (whether or not requiring a prescription). Such term shall not include toiletries or similar preparations (such as toothpaste, shaving lotion, shaving cream, etc.) nor shall it include cosmetics (such as face creams, deodorants, hand lotions, etc., or any similar preparation used for ordinary cosmetic purposes) or sundry items. Amounts expended for items which, under this subparagraph, are excluded from the term medicine and drugs shall not constitute amounts expended for ``medical care''. (3) Status as spouse or dependent. In the case of medical expenses for the care of a person who is the taxpayer's spouse or dependent, the deduction under section 213 is allowable if the status of such person as ``spouse'' or ``dependent'' of the taxpayer exists either at the time the medical services were rendered or at the time the expenses were paid. In determining whether such status as ``spouse'' exists, a taxpayer who is legally separated from his spouse under a decree of separate maintenance is not considered as married. Thus, payments made in June 1956 by A, for medical services rendered in 1955 to B, his wife, may be deducted by A for 1956 even though, before the payments were made, B may have died or in 1956 secured a divorce. Payments made in July 1956 by C, for medical services rendered to D in 1955 may be deducted by C for 1956 even though C and D were not married until June 1956. (4) Medical insurance. (i)(a) For taxable years beginning after December 31, 1966, expenditures for insurance shall constitute expenses paid for medical care only to the extent that such amounts are paid for insurance covering expenses of medical care referred to in subparagraph (1) of this paragraph. In the case of an insurance contract under which amounts are payable for other than medical care (as, for example, a policy providing an indemnity for loss of income or for loss of life, limb, or sight): (1) No amount shall be treated as paid for insurance covering expenses of medical care referred to in subparagraph (1) of this paragraph unless the charge for such insurance is either separately stated in the contract or furnished to the policyholder by the insurer in a separate statement, (2) The amount taken into account as the amount paid for such medical insurance shall not exceed such charge, and (3) No amount shall be treated as paid for such medical insurance if the amount specified in the contract (or furnished to the policyholder by the insurer in a separate statement) as the charge for such insurance is unreasonably large in relation to the total charges under the contract. For purposes of the preceding sentence, amounts will be considered payable for other than medical care under the contract if the contract provides for the waiver of premiums upon the occurrence of an event. In determining whether a separately stated charge for insurance covering expenses of medical care is unreasonably large in relation to the total premium, the relationship of the coverages under the contract together with all of the facts and circumstances shall be considered. In determining whether a contract constitutes an ``insurance'' contract it is irrelevant whether the benefits are payable in cash or in services. For example, amounts paid for hospitalization insurance, for membership in an association furnishing cooperative or so-called free-choice medical service, or for group hospitalization and clinical care are expenses paid for medical care. Premiums paid under Part B, Title XVIII of the Social Security Act (42 U.S.C. 1395j-1395w), relating to supplementary medical insurance benefits for the aged, are amounts paid for insurance covering expenses of medical care. Taxes imposed by any governmental unit do not, however, constitute amounts paid for such medical insurance. (b) For taxable years beginning after December 31, 1966, subject to the rules of (a) of this subdivision, premiums paid during a taxable year by a taxpayer under the age of 65 for insurance covering expenses of medical care for the taxpayer, his spouse, or a dependent after the taxpayer attains the age of 65 are to be treated as expenses paid during the taxable year for insurance [[Page 325]] covering expenses of medical care if the premiums for such insurance are payable (on a level payment basis) under the contract: (1) For a period of 10 years or more, or (2) Until the year in which the taxpayer attains the age of 65 (but in no case for a period of less than 5 years). For purposes of this subdivision (b), premiums will be considered payable on a level payment basis if the total premium under the contract is payable in equal annual or more frequent installments. Thus, a total premium of $10,000 payable over a period of 10 years at $1,000 a year shall be considered payable on a level payment basis. (ii) For taxable years beginning before January 1, 1967, expenses paid for medical care shall include amounts paid for accident or health insurance. In determining whether a contract constitutes an ``insurance'' contract it is irrelevant whether the benefits are payable in cash or in services. For example, amounts paid for hospitalization insurance, for membership in an association furnishing cooperative or so-called free-choice medical service, or for group hospitalization and clinical care are expenses paid for medical care. (f) Exclusion of amounts allowed for care of certain dependents. Amounts taken into account under section 44A in computing a credit for the care of certain dependents shall not be treated as expenses paid for medical care. (g) Reimbursement for expenses paid in prior years. (1) Where reimbursement, from insurance or otherwise, for medical expenses is received in a taxable year subsequent to a year in which a deduction was claimed on account of such expenses, the reimbursement must be included in gross income in such subsequent year to the extent attributable to (and not in excess of) deductions allowed under section 213 for any prior taxable year. See section 104, relating to compensation for injuries or sickness, and section 105(b), relating to amounts expended for medical care, and the regulations thereunder, with regard to amounts in excess of or not attributable to deductions allowed. (2) If no medical expense deduction was taken in an earlier year, for example, if the standard deduction under section 141 was taken for the earlier year, the reimbursement received in the taxable year for the medical expense of the earlier year is not includible in gross income. (3) In order to allow the same aggregate medical expense deductions as if the reimbursement received in a subsequent year or years had been received in the year in which the payments for medical care were made, the following rules shall be followed: (i) If the amount of the reimbursement is equal to or less than the amount which was deducted in a prior year, the entire amount of the reimbursement shall be considered attributable to the deduction taken in such prior year (and hence includible in gross income); or (ii) If the amount of the reimbursement received in such subsequent year or years is greater than the amount which was deducted for the prior year, that portion of the reimbursement received which is equal in amount to the deduction taken in the prior year shall be considered as attributable to such deduction (and hence includible in gross income); but (iii) If the deduction for the prior year would have been greater but for the limitations on the maximum amount of such deduction provided by section 213 (c), then the amount of the reimbursement attributable to such deduction (and hence includible in gross income) shall be the amount of the reimbursement received in a subsequent year or years reduced by the amount disallowed as a deduction because of the maximum limitation, but not in excess of the deduction allowed for the previous year. (4) The application of subparagraphs (1), (2), and (3) of this paragraph may be illustrated by the following examples. Examples 1 and 2 reflect the maximum limitation on the medical expense deduction applicable to taxable years beginning after December 31, 1961. Examples 3 and 4 reflect the maximum limitation on the medical expense deduction applicable to taxable years beginning prior to January 1, 1962. For explanation of such maximum medical expense limitations, see paragraph (c) of this section. [[Page 326]] Example 1. Taxpayer A, a single individual (not the head of a household and not a surviving spouse) with one dependent, is entitled to two exemptions under the provisions of section 151. He had an adjusted gross income of $35,000 for the calendar year 1962. During 1962 he paid $16,000 for medical care. A received no reimbursement for such medical expenses in 1962, but in 1963 he received $6,000 upon an insurance policy covering the medical expenses which he paid in 1962. A was allowed a deduction of $10,000 (the maximum) from his adjusted gross income for 1962. The amount which A must include in his gross income for 1963 is $1,050, and the amount to be excluded from gross income for 1963 is $4,950, computed as follows: Payments for medical care in 1962 (not reimbursed in 1962)... $16,000 Less: 3 percent of $35,000 (adjusted gross income)........... 1,050 ---------- Excess of medical expenses not reimbursed in 1962 over 3 10,000 percent of adjusted gross income........................ Allowable deduction for 1962................................. 10,000 ---------- Amount by which the medical deductions for 1962 would have 4,950 been greater than $10,000 but for the limitations on the maximum amount provided by section 213...................... ========== Reimbursement received in 1963............................... $6,000 Less: Amount by which the medical deduction for 1962 would 4,950 have been greater than $10,000 but for the limitation on the maximum amount provided by section 213...................... ---------- Reimbursement received in 1963 reduced by the amount by which 1,050 the medical deduction for 1962 would have been greater than $10,000 but for the limitations on the maximum amount provided by section 213..................................... Amount attributed to medical deduction taken for 1962........ 1,050 Amount to be included in gross income for 1963............... 1,050 Amount to be excluded from gross income for 1963 ($6,000 less 4,950 $1,050)..................................................... Example 2. Assuming that A, in example (1), received $15,000 in 1963 as reimbursement for the medical expenses which he paid in 1962, the amount which A must include in his gross income for 1963 is $10,000, and the amount to be excluded from gross income for 1963 is $5,000, computed as follows: Reimbursement received in 1963............................... $15,000 Less: Amount by which the medical deduction for 1962 would 4,950 have been greater than $10,000 but for the limitations on the maximum amount provided by section 213.................. ---------- Reimbursement received in 1963 reduced by the amount by 10,050 which the medical deduction for 1962 would have been greater than $10,000 but for the limitations on the maximum amount provided by section 213.................. Deduction allowable for 1962................................. 10,000 Amount of reimbursement received in 1963 to be included in 10,000 gross income for 1963 as attributable to deduction allowable for 1962.................................................... Amount to be excluded from gross income for 1963 ($15,000 5,000 less $10,000)............................................... Example 3. Taxpayer A, a single individual (not the head of a household and not a surviving spouse) with one dependent, is entitled to two exemptions under the provisions of section 151. He had an adjusted gross income of $35,000 for the calendar year 1956. During 1956 he paid $9,000 for medical care. A received no reimbursement for such medical expenses in 1956, but in 1957 he received $6,000 upon an insurance policy covering the medical expenses which he paid in 1956. A was allowed a deduction of $5,000 (the maximum) from his adjusted gross income for 1956. The amount which A must include in his gross income for 1957 is $3,050 and the amount to be excluded from gross income for 1957 is $2,950, computed as follows: Payments for medical care in 1956 (not reimbursed in 1956)... $9,000 Less: 3 percent of $35,000 (adjusted gross income)........... 1,050 ---------- Excess of medical expenses not reimbursed in 1956 over 3 7,950 percent of adjusted gross income........................ Allowable deduction for 1956................................. 5,000 ---------- Amount by which the medical deductions for 1956 would 2,950 have been greater than $5,000 but for the limitations on the maximum amount provided by section 213.............. ========== Reimbursement received in 1957............................... 6,000 Less: Amount by which the medical deduction for 1956 would 2,950 have been greater than $5,000 but for the limitations on the maximum amount provided by section 213...................... ---------- Reimbursement received in 1957 reduced by the amount by 8,050 which the medical deduction for 1956 would have been greater than $5,000 but for the limitations on the maximum amount provided by section 213.................. Amount attributed to medical deduction taken for 1956.... 3,050 Amount to be included in gross income for 1957........... 3,050 Amount to be excluded from gross income for 1957 ($6,000 2,950 less $3,050)............................................ Example 4. Assuming that A, in example (3), received $8,000 in 1957 as reimbursement for the medical expenses which he paid in 1956, the amount which A must include in his gross income for 1957 is $5,000 and the amount to be excluded from gross income for 1957 is $3,000 computed as follows: Reimbursement received in 1957............................... $8,000 Less: Amount by which the medical deduction for 1956 would 2,950 have been greater than $5,000 but for the limitations on the maximum amount provided by section 213...................... ---------- [[Page 327]] Reimbursement received in 1957 reduced by the amount by 5,050 which the medical deduction for 1956 would have been greater than $5,000 but for the limitations on the maximum amount provided by section 213.................. Deduction allowable for 1956................................. 5,000 Amount of reimbursement received in 1957 to be included in 5,000 gross income for 1957 as attributable to deduction allowable for 1956.................................................... Amount to be excluded from gross income for 1957 ($8,000 less 3,000 $5,000)..................................................... (h) Substantiation of deductions. In connection with claims for deductions under section 213, the taxpayer shall furnish the name and address of each person to whom payment for medical expenses was made and the amount and date of the payment thereof in each case. If payment was made in kind, such fact shall be so reflected. Claims for deductions must be substantiated, when requested by the district director, by a statement or itemized invoice from the individual or entity to which payment for medical expenses was made showing the nature of the service rendered, and to or for whom rendered; the nature of any other item of expense and for whom incurred and for what specific purpose, the amount paid therefor and the date of the payment thereof; and by such other information as the district director may deem necessary. [T.D. 6500, 25 FR 11402, Nov. 26, 1960] Editorial Note: For Federal Register citations affecting Sec. 1.213-1, see the List of CFR Sections Affected in the Finding Aids section of this volume.