26 C.F.R. § 1.214A-5 Other special rules relating to employment-related expenses.
Title 26 - Internal Revenue
(a) Payments to related individuals. No deduction will be allowed under section 214(a) and §1.214A–1(a) for the amount of any employment-related expenses paid by the taxpayer to an individual who bears to the taxpayer any relationship described in section 152(a) (1) through (8). These relationships are those of a son or daughter or descendant thereof; a stepson or stepdaughter; a brother, sister, stepbrother, or stepsister; a father or mother or an ancestor of either; a stepfather or stepmother; a nephew or niece; an uncle or aunt; or a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. In addition, no deduction will be allowed under section 214(a) for the amount of any employment-related expenses paid by the taxpayer to an individual who qualifies as a dependent of the taxpayer for the taxable year within the meaning of section 152(a)(9), which relates to an individual (other than the taxpayer's spouse) whose principal place of abode for the taxable year is the home of the taxpayer and who is a member of the taxpayer's household. (b) Expenses qualifying as medical expenses. An expense which may constitute an amount otherwise deductible under section 213, relating to medical, etc., expenses, may also constitute an expense for which a deduction is allowable under section 214(a) and §1.214A–1(a). In such a case, that part of the amount for which a deduction is allowed under section 214(a) will not be considered as an expense allowable as a deduction under section 213. On the other hand, where an amount is treated as a medical expense under section 213 for purposes of determining the amount deductible under that section, it may not be treated as an employment-related expense for purposes of section 214. The application of this paragraph may be illustrated by the following examples: Example 1. A Taxpayer pays $520 of employment-related expenses in the taxable year for the care of his child during one month of such year when the child is physically incapable of caring for himself. These expenses are incurred for services performed in the taxpayer's household and are of a nature which qualify as medical expenses under section 213. The taxpayer's adjusted gross income for the taxable year is $5,000. Of the total expenses, the taxpayer may take $400 into account under section 214; the balance of the expenses, or $120, may be treated as medical expenses to which section 213 applies. However, this amount does not exceed 3 percent of the taxpayer's adjusted gross income for the taxable year and is thus not allowable as a deduction under section 213. Example 2. Assume the same facts as in Example 1. In such case it is not proper for the taxpayer first to determine under section 213 his deductible medical expenses of $370 ($520−[$5,000×3%]) and then claim the $150 balance as employment-related expenses for purposes of section 214. This result is reached because the $150 balance has been treated as a medical expense in determining the amount deductible under section 213. Example 3. A taxpayer incurs and pays $1,000 of employment-related expenses each month during the taxable year for the care of his child. These expenses are incurred for services performed in the taxpayer's household, and they also qualify as medical expenses under section 213. The taxpayer's adjusted gross income for the taxable year is $18,000. No reduction in the amount of the expenses is required under §1.214A–3, and the taxpayer takes $4,800 ($400×12) of such expenses into account under section 214. The balance, or $7,200, he treats as medical expenses for purposes of section 213. The allowable deduction under section 213 for such expenses is limited to the excess of such balance of $7,200 over $540 (3 percent of the taxpayer's adjusted gross income of $18,000), or $6,600. [T.D. 7411, 41 FR 15410, Apr. 13, 1976]
Title 26: Internal Revenue
PART 1—INCOME TAXES
Additional Itemized Deductions for Individuals
§ 1.214A-5 Other special rules relating to employment-related expenses.
