Title 26: Internal Revenue
PART 1—INCOME TAXES
Additional Itemized Deductions for Individuals
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§ 1.214A-3 Reduction of expenses for certain disability payments and adjusted gross income.
(a) Amount of reduction. This section applies only if the taxpayer incurs employment-related expenses during a taxable year solely attributable to a qualifying individual who is either a dependent (other than a dependent described in §1.214A–1(b)(1)(i)) of the taxpayer or a spouse of the taxpayer and who is physically or mentally incapable of caring for himself. The amount of such expenses, which may be taken into account under section 214 shall be reduced:
(1) In the case of such expenses attributable to a dependent who is physically or mentally incapable of caring for himself, by the excess, if any, over $750 of the sum of (i) such dependent's adjusted gross income for such taxable year and (ii) the disability payments (as defined in paragraph (b) of this section) he receives during such year, and
(2) In the case of such expenses attributable to a spouse who is physically or mentally incapable of caring for himself, by the disability payments (as defined in paragraph (b) of this section) such spouse receives during such taxable year.
The reduction so required must be made on the basis of a calendar month. Thus, the employment-related expenses attributable to a spouse which are incurred during any calendar month of the taxable year must be reduced by an amount equal to the disability payments received by the spouse during such taxable year divided by the number of calendar months therein during which such employment-related expenses are incurred. Further, the employment-related expenses attributable to a dependent which are incurred during any calendar month of the taxable year must be reduced by an amount equal to the excess described in paragraph (a)(1) of this section divided by the number of calendar months therein during which such employment-related expenses are incurred. For purposes of this reduction, a period of less than a calendar month will be treated as a calendar month. The reduction is not required to be made in respect of any employment-related expenses solely attributable to a dependent under the age of 15 for whom the taxpayer is entitled to a deduction for a personal exemption under section 151(e). The reduction required by this paragraph must be made before applying the limitations under section 214 (c) and (d) and §1.214A–2 for the taxable year. The application of this paragraph may be illustrated by the following examples:
Example 1. A, a taxpayer who uses the calendar year as the taxable year, incurs $250 of employment-related expenses during each month of 1972 for services within his household. B, his wife, is physically incapable of caring for herself. During 1972, B receives total disability payments of $1,200, consisting of a lump-sum disability payment of $300 received in June and disability payments of $75 received each month. Under such circumstances, A may take into account $150 of his employment-related expenses for each month of 1972, determined as follows:
Employment-related expenses attributable to B incurred during $250 each month..................................................Less: Disability payments received by B in 1972 divided by 100 number of calendar months in 1972 during which employment- related expenses attributable to B are incurred ($1,200÷12)............................................ ---------- Employment-related expenses to be taken into account..... 150
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Example 2. B, a single individual who uses the calendar year as the taxable year, incurs $200 of employment-related expenses during each month of 1972 for services within his household. C, his son aged 15, is physically incapable of caring for himself. During 1972, C receives total disability payments of $1,200, consisting of a lump-sum disability payment of $300 received in June and disability payments of $75 received each month. For 1972, C has adjusted gross income of $1,050. Under such circumstances, B may take into account $75 of his employment-related expenses for each month of 1972, determined as follows:
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Employment-related expenses attributable to C incurred during $200 each month.................................................. ==========Less: Reduction under this paragraph: C's adjusted gross income for 1972....................... 1,050 Disability payments received by C in 1972................ 1,200 ---------- Total................................................. 2,250 Less: Income limitation.................................. 750 ---------- Excess under subparagraph (1) of this paragraph.......... 1,500 ========== Excess divided by number of calendar months in 1972 125 during which employment-related expenses attributable to C are incurred ($1,500÷12)......................... ==========Employment-related expenses to be taken into account......... 75
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Example 3. H, a taxpayer who uses the calendar year as the taxable year, incurs employment-related expenses attributable to W, his wife, during five months of 1972, including $350 for the month of July, for services within his household. W, who is physically incapable of caring for herself, receives during 1972 total disability payments of $625. Under such circumstances, H may take into account $225 of his employment-related expenses for July, determined as follows:
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Employment-related expenses attributable to W incurred during $350 July........................................................Less: Disability payments received by W in 1972 divided by 125 number of calendar months in 1972 during which employment- related expenses attributable to W are incurred ($625÷5)............................................... ---------- Employment-related expenses to be taken into account..... 225 ==========
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Example 4. S, a single individual who uses the calendar year as the taxable year, incurs and pays during 1972 $450 of employment-related expenses attributable to P, his father, for each of the six months during which his father is incapacitated. During 1972, P receives adjusted gross income of $1,266, a gift of $300, and a disability payment of $55 for each month of disability. During 1972 S receives adjusted gross income of less than $18,000. Under such circumstances, S may deduct $1,854 for 1972 under section 214, determined as follows:
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Employment-related expenses attributable to P incurred during $450 each month of his incapacity................................ ==========Less: Reduction under this paragraph: P's adjusted gross income for 1972....................... 1,266 Disability payments received by P in 1972................ 330 ---------- Total................................................. 1,596 Less: Income limitation.................................. 750 ---------- Excess under subparagraph (1) of this paragraph....... 846 ========== Excess divided by number of calendar months in 1972 141 during which employment-related expenses attributable to P are incurred ($846÷6)............................ ---------- Employment-related expenses to be taken into account for 309 each month of P's incapacity............................ ---------- Deduction for 1972 ($309x6).............................. 1,854
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(b) Disability payment defined. For purposes of paragraph (a) of this section, the term disability payment means any payment not includible in gross income which is made on account of the physical or mental incapacity of an individual. A disability payment may include social security payments, State or local payments, private disability insurance payments, or payments from a private person on account of a civil wrong, if attributable to the mental or physical disability of the individual. Gifts are not considered to be disability payments for purposes of this paragraph.
(c) Expenses not solely attributable. An employment-related expense which is not solely attributable to a qualifying individual to whom paragraph (a) (1) or (2) of this section applies shall not be reduced under this section. Thus, for example, if household expenses are incurred with respect to a qualifying individual to whom paragraph (a) (1) or (2) of this section applies and also with respect to a qualifying dependent under the age of 15, such expenses shall not be considered to be solely attributable to a qualifying individual to whom paragraph (a) (1) or (2) of this section applies, and such expenses shall not be reduced under this section. The application of this paragraph may be illustrated by the following examples:
Example 1. A taxpayer has a child, aged 6, and his spouse is physically incapable of caring for herself. During the taxable year he incurs employment-related expenses of $500 solely attributable to the care of the child, of $1,000 solely attributable to the care of his spouse, and of $1,500 for household services attributable to both the child and spouse. Of the taxpayer's total employment-related expenses of $3,000, only the $1,000 solely attributable to his spouse must be reduced as provided in paragraph (a) of this section.
Example 2. A taxpayer has a dependent, aged 15, and a spouse both of whom are physically incapable of caring for themselves. During the taxable year he incurs employment-related expenses of $500 solely attributable to the care of the dependent, of $1,000 solely attributable to the care of his spouse, and of $1,500 for household services equally attributable to both the dependent and spouse. The $1,500 of household expenses must be allocated one-half to the dependent and one-half to the spouse. Accordingly, employment-related expenses of $1,250 are attributable to the dependent, and employment-related expenses of $1,750 are attributable to the spouse. The expenses attributable to each must be reduced as provided in paragraph (a) of this section.
(d) Ordering of reductions and limitations. For purposes of determining the amount of employment-related expenses which may be taken into account under section 214, the employment-related expenses incurred by the taxpayer during any calendar month of the taxable year are first to be reduced by the amount of reduction determined under section 214(e)(5) and paragraph (a) (1) or (2) of this section in respect of disability payments and adjusted gross income, then by the outside-of-household limitation prescribed by section 214(c)(2)(B) and §1.214A–2(b)(2), then by the overall monthly limitation of $400 prescribed by section 214(c)(1) and §1.214A–2(a), and finally by the taxpayer's income limitation ($35,000 or $18,000, as the case may be) prescribed by section 214(d) and §1.214A–2(c), in that order. The application of this subparagraph may be illustrated by the following examples:
Example 1. The taxpayer's wife is physically incapable of caring for herself. He incurs employment-related expenses of $1,000 during the calendar month for services within the household. Disability payments of the wife applicable to such month under paragraph (a)(2) of this section amount to $350. The taxpayer's excess adjusted gross income (over the taxpayer's income limitation) applicable to such month under §1.214A–2(c)(1) amounts to $300. Under such circumstances, the amount of employment-related expenses for such month which may be taken into account for purposes of section 214 is $100, determined as follows:
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Employment-related expenses.................................. $1,000 Less: Reduction under paragraph (a)(2) of this section..... 350 ---------- Balance................................................ 650 ----------Application of limitation under § 1.214A-2(a) 400 (employment-related expenses of $650, but not to exceed $400).......................................................Less: Reduction under § 1.214A-2(c)(1).................. 300 ---------- Employment-related expenses to be taken into account... 100
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Example 2. The taxpayer's child, aged 15, is physically incapable of caring for himself the taxpayer incurs employment-related expenses of $487 duing June for services within the household. The excess of the adjusted gross income and disability payments of the dependent child for the taxable year (over the $750 limitation) applicable to June under paragraph (a)(1) of this section amounts to $112. The taxpayer's excess adjusted gross income (over the taxpayer's income limitation) applicable to June under §1.214A–2(c)(1) amounts to $125. Under such circumstances, the amount of employment-related expenses for June which may be taken into account for purposes of section 214 is $250, determined as follows:
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Employment-related expenses.................................. $487Less: Reduction under paragraph (a)(1) of this section....... 112 ---------- Balance................................................ 375Less: Reduction under § 1.214A-2(c)(1).................. 125 ---------- Employment-related expenses to be taken into account... 250
