CERTAIN EXPENSES TO ENABLE INDIVIDUALS TO BE GAIN-FULLY EMPLOYED.

SEC. 210. CERTAIN EXPENSES TO ENABLE INDIVIDUALS TO BE GAIN-FULLY EMPLOYED. (a) In General—Section 214 (relating to expenses for care of certain dependents) is amended to read as follows: “SEC. 214. EXPENSES FOR HOUSEHOLD AND DEPENDENT CARE SERVICES NECESSARY FOR GAINFUL EMPLOYMENT. “(a) Allowance of Deduction—In the case of an individual who maintains a household which includes as a member one or more qualifying individuals (as defined in subsection (b)(1)), there shall be allowed as a deduction the employment-related expenses (as defined in subsection (b)(2)) paid by him during the taxable year. “(b) Definitions, Etc.—For purposes of this section— “(1) Qualifying individual—The term ‘qualifying individual’ means— “(A) a dependent of the taxpayer who is under the age of 15 and with respect to whom the taxpayer is entitled to a deduction under section 151(e), “(B) a dependent of the taxpayer who is physically or men-tally incapable of caring for himself, or “(C) the spouse of the taxpayer, if he is physically or mentally incapable of caring for himself. “(2) Employment-related expenses—The term ‘employment-related expenses’ means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed: “(A) expenses for household services, and “(B) expenses for the care of a qualifying individual. “(3) Maintaining a household—An individual shall be treated as maintaining a household for any period only if over half of the cost of maintaining the household during such period is furnished by such individual (or if such individual is married during such period, is furnished by such individual and his spouse). “(c) Limitations on Amounts Deductible— “(1) In general—A deduction shall be allowed under sub-section (a) for employment-related expenses incurred during any month only to the. extent such expenses do not exceed $400. “(2) Expenses must be for services in the household.— “(A) In general—Except as provided in subparagraph (B), a deduction shall be allowed under subsection (a) for employment-related expenses only if they are incurred for services in the taxpayer’s household. “(B) Exception—Employment-related expenses described in subsection (b)(2)(B) which are incurred for services outside the taxpayer’s household shall be taken into account only if incurred for the care of a qualifying individual described in subsection (b)(1)(A) and only to the extent such expenses incurred during any month do not exceed— “(i) $200, in the case of one such individual, “(ii) $300, in the case of two such individuals, and “(iii) $400, in the case of three or more such individuals. “(d) Income Limitation.—If the adjusted gross income of the tax-payer exceeds $18,000 for the taxable year during which the expenses are incurred, the amount of the employment-related expenses incurred during any month of such year which may be taken into account under this section shall (after the application of subsections (e) (5) and (c)) be further reduced by that portion of one-half of the excess of the adjusted gross income over $18,000 which is properly allocable to such 85 Stat. 519month. For purposes of the preceding sentence, if the taxpayer is married during any period of the taxable year, there shall be taken into account the combined adjusted gross income of the taxpayer and his spouse for such period. “(e) Special Rules—For purposes of this section— “(1) Married couples must file joint return—If the tax-payer is married at the close of the taxable year, the deduction provided by subsection (a) shall be allowed only if the taxpayer and his spouse file a single return jointly for the taxable year. “(2) Gainful employment requirement—If the taxpayer is married for any period during the taxable year, there shall be taken into account employment-related expenses incurred during any month of such period only if— “(A) both spouses are gainfully employed on a substantially full-time basis, or “(B) the spouse is a qualifying individual described in subsection (b)(1)(C). “(3) Certain married individuals living apart—An individual who for the taxable year would be treated as not married under section 143(b) if paragraph (1) of such section referred to any dependent, shall be treated as not married for such taxable year. “(4) Payments to related individuals—No deduction shall be allowed under subsection (a) for any amount paid by the tax-payer to an individual bearing a relationship to the taxpayer described in paragraphs (1) through (8) of section 152(a) (relating to definition of dependent) or to a dependent described in paragraph (9) of such section. “(5) Reduction for certain payments—In the case of employment-related expenses incurred during any taxable year solely with respect to a qualifying individual (other than an individual who is also described in subsection (b)(1)(A)), the amount of such expenses which may be taken into account for purposes of this section shall (before the application of subsection (c)) be reduced— “(A) if such individual is described in subsection (b) (1) (B), by the amount by which the sum of— “(i) such individual’s adjusted gross income for such taxable year, and “(ii) the disability payments received by such individual during such year, exceeds $750, or “(B) in the case of a qualifying individual described in subsection (b) (1) (C), by the amount of disability payments received by such individual during the taxable year. For purposes of this paragraph, the term ‘disability payment’ means a payment (other than a gift) which is made on account of the physical or mental condition of an individual and which is not included in gross income. “(f) Regulations—The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section.” 85 Stat. 520 (b) Clerical Amendment—The table of sections for part VII of subchapter B of chapter 1 is amended by striking out the item relating to section 214 and inserting in lieu thereof the following: “Sec. 214. Expenses for household and dependent care services necessary for gainful employment.”. (c) Effective Date—The amendments made by this section shall apply to taxable years beginning after December 31, 1971.