medical expense deduction

medical expense deduction Sec. 106. (a) Subsection (a) of section 213 of the Internal Revenue Code of 1954 (relating to allowance of deduction) is amended to read as follows: “(a) Allowance of Deduction.— There shall be allowed as a deduction the following amounts, not. compensated for by insurance or otherwise— “(1) the amount by which the amount of the expenses paid during the taxable year (reduced by any amount deductible under paragraph (2)) for medical care of the taxpayer, his spouse, and dependents (as defined in section 152) exceeds 3 percent of the adjusted gross income, and “(2) an amount (not in excess of $150) equal to one-half of the expenses paid during the taxable year for insurance which constitutes medical care for the taxpayer, his spouse, and dependents.” (b) The second sentence of section 213(b) of such Code (relating to limitation with respect to medicine and drugs) is repealed. (c) Section 213(e) of such Code (relating to definitions) is amended by renumbering paragraph (2) as paragraph (4), and by striking out paragraph (1) and inserting in lieu thereof the following: “(1) The term ‘medical care’ means amounts paid— “(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, “(B) for transportation primarily for and essential to medical care referred to in subparagraph (A), or “(C) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B). “(2) In the case of an insurance contract under which amounts are payable for other than medical care referred to in subparagraphs (A) and (B) of paragraph (1)— “(A) no amount shall be treated as paid for insurance to which paragraph (1)(C) applies unless the charge for such insurance is either separately stated in the contract, or furnished to the policyholder by the insurance company in a separate statement, “(B) the amount taken into account as the amount paid for such insurance shall not exceed such charge, and “(C) no amount shall be treated as paid for such insurance if the amount specified in the contract (or furnished to the 79 Stat. 337policyholder by the insurance company in a separate statement) as the charge for such insurance is unreasonably large in relation to the total charges under the contract. “(3) Subject to the limitations of paragraph (2), premiums paid during the taxable year by a taxpayer before he attains the age of 65 for insurance covering medical care (within the meaning of subparagraphs (A) and (B) of paragraph (1)) for the taxpayer, his spouse, or a dependent after the taxpayer attains the age of 65 shall be treated as expenses paid during the taxable year for insurance which constitutes medical care if premiums for such insurance are payable (on a level payment basis) under the contract for a period of 10 years or more or until the year in which the taxpayer attains the age of 65 (but in no case for a period of less than 5 years).” (d) (1) Section 213 of such Code (relating to medical, dental, etc., expenses) is amended by striking out subsections (c) and (g) of such section. (2) (A) Section 72(m)(5)(A)(i) of such Code (relating to special rules applicable to employment, annuities and distributions under employee plans) is amended by striking out “section 213(g)(3)” and inserting in lieu thereof “paragraph (7) of this subsection”. (B) Section 72 (m) of such Code is further amended by adding at the end thereof the following new paragraph: “(7) Meaning of disabled.— For purposes of this section, an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result, in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary or his delegate may require.” (C) Subparagraphs (A)(iii) and (B)(iii) of section 72(d)(1) of such Code (relating to treatment of certain distributions with respect to contributions by self-employed individuals) are each amended by striking out “section 213(g)(3)” and inserting in lieu thereof “subsection (m)(7)”. (3) Section 79(b)(1) of such Code (relating to groupterm life insurance purchased for employees) is amended by striking out “paragraph (3) of section 213(g), determined without regard to paragraph (4) thereof” and inserting in lieu thereof “section 72(m)(7)”. (4) Section 401(d)(4)(B) of such Code (relating to additional requirements for qualification of trusts and plans benefiting owner-employees) is amended by striking out. “section 213(g)(3)” and inserting in lieu thereof “section 72 (m)(7)”. (5) Section 405(b)(1)(D)(ii) of such Code (relating to qualified bond purchase plans) is amended by striking out “section 213(g)(3)” and inserting in lieu thereof “section 72(m)(7)”. (e) The amendments made by this section shall apply to taxable years beginning after December 31, 1966.