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Medical and Dental Expenses

30 July, 2015 - 16:18

Section 213(a) allows a taxpayer to deduct expenses of medical care “paid during the taxable year, not compensated for insurance or otherwise” to the extent such expenses exceed 10% of the taxpayer’s adjusted gross income. This includes the expenses of prescription drugs. § 213(b). Section 213(d)(1)(A) defines “medical care” expenses to include expenditures “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” Medical care expenses also includes the expenses of transportation “primarily for and essential to medical care,” certain long-term care services, and insurance that covers “medical care” as so defined.

  • Why should there be a floor on the deductibility of medical expenses? Why should the determinant of that floor be a taxpayer’s adjusted gross income? See William P. Kratzke, The (Im)Balance of Externalities in Employment-Based Exclusions from Gross Income, 60 The Tax Lawyer 1, 24-25 (2006).
  • Think: What is the profile of taxpayers most likely to claim a medical expense deduction? Seeid. What type of medical expenditures are such taxpayers likely to make?

We are met once again by the chicken-and-egg question of when taxpayer’s personal circumstances can support a deduction for certain expenditures. Why did taxpayer have little choice in making the expenditure?

Ochs v. Commissioner, 195 F.2d 692 (2d Cir.), cert. denied, 344 U.S. 827 (1952)

The question raised by this appeal is whether the taxpayer Samuel Ochs was entitled under § [213] of the Internal Revenue Code to deduct the sum of $1,456.50 paid by him for maintaining his two minor children in day school and boarding school as medical expenses incurred for the benefit of his wife. ...

The Tax Court made the following findings:

‘During the taxable year petitioner was the husband of Helen H. Ochs. They had two children, Josephine age six and Jeanne age four.

‘On December 10, 1943, a thyroidectomy was performed on petitioner’s wife. A histological examination disclosed a papillary carcinoma of the thyroid with multiple lymph node metastases, according to the surgeon’s report. During the taxable year the petitioner maintained his two children in day school during the first half of the year and in boarding school during the latter half of the year at a cost of $1,456.50. Petitioner deducted this sum from his income for the year 1946 as a medical expense under § [213] ...

‘During the taxable year, as a result of the operation on December 10, 1943, petitioner’s wife was unable to speak above a whisper. Efforts of petitioner’s wife to speak were painful, required much of her strength, and left her in a highly nervous state. Petitioner was advised by the operating surgeon that his wife suffered from cancer of the throat, a condition which was fatal in many cases. ... Petitioner became alarmed when, by 1946, his wife’s voice had failed to improve ... Petitioner and his wife consulted a reputable physician and were advised by him that if the children were not separated from petitioner’s wife she would not improve and her nervousness and irritation might cause a recurrence of the cancer. Petitioner continued to maintain his children in boarding school after the taxable year here involved until up to the end of five years following the operation of December 10, 1943, petitioner having been advised that if there was no recurrence of the cancer during that time his wife could be considered as having recovered from the cancer.

‘During the taxable year petitioner’s income was between $5,000 and $6,000. Petitioner’s two children have not attended private school but have lived at home and attended public school since a period beginning five years after the operation of December 10, 1943. Petitioner’s purpose in sending the children to boarding school during the year 1946 was to alleviate his wife’s pain and suffering in caring for the children by reason of her inability to speak above a whisper and to prevent a recurrence of the cancer which was responsible for the condition of her voice. He also thought it would be good for the children to be away from their mother as much as possible while she was unable to speak to them above a whisper.

‘Petitioner’s wife was employed part of her time in 1946 as a typist and stenographer. On account of the impairment which existed in her voice she found it difficult to hold a position and was only able to do part-time work. At the time of the hearing of this proceeding in 1951, she had recovered the use of her voice and seems to have entirely recovered from her throat cancer.’

The Tax Court said in its opinion that it had no reason to doubt the good faith and truthfulness of the taxpayer ..., but it nevertheless held that the expense of sending the children to school was not deductible as a medical expense under the provisions of § [213] ...

In our opinion the expenses incurred by the taxpayer were non-deductible family expenses within the meaning of § [262(a)] of the Code rather than medical expenses. Concededly the line between the two is a difficult one to draw, but this only reflects the fact that expenditures made on behalf of some members of a family unit frequently benefit others in the family as well. The wife in this case had in the past contributed the services – caring for the children – for which the husband was required to pay because, owing to her illness, she could no longer care for them. If, for example, the husband had employed a governess for the children, or a cook, the wages he would have paid would not be deductible. Or, if the wife had died, and the children were sent to a boarding school, there would certainly be no basis for contending that such expenses were deductible. The examples given serve to illustrate that the expenses here were made necessary by the loss of the wife’s services, and that the only reason for allowing them as a deduction is that the wife also received a benefit. We think it unlikely that Congress intended to transform family expenses into medical expenses for this reason. The decision of the Tax Court is further supported by its conclusion that the expenditures were to some extent at least incurred while the wife was acting as a typist in order to earn money for the family. ...

The decision is affirmed.

FRANK, Circuit Judge (dissenting).


... The Commissioner argued, successfully in the Tax Court, that, because the money spent was only indirectly for the sake of the wife’s health and directly for the children’s maintenance, it could not qualify as a ‘medical expense.’ Much is made of the fact that the children themselves were healthy and normal – and little of the fact that it was their very health and normality which were draining away the mother’s strength. The Commissioner seemingly admits that the deduction might be a medical expense if the wife were sent away from her children to a sanitarium for rest and quiet, but asserts that it never can be if, for the very same purpose, the children are sent away from the mother – even if a boarding school for the children is cheaper than a sanitarium for the wife. I cannot believe that Congress intended such a meaningless distinction, that it meant to rule out all kinds of therapeutic treatment applied indirectly rather than directly – even though the indirect treatment be ‘primarily for the *** alleviation of a physical or mental defect or illness.’ [footnote omitted]. The cure ought to be the doctor’s business, not the Commissioner’s.

The only sensible criterion of a ‘medical expense’ – and I think this criterion satisfies Congressional caution without destroying what little humanity remains in the Internal Revenue Code – should be that the taxpayer, in incurring the expense, was guided by a physician’s bona fide advice that such a treatment was necessary to the patient’s recovery from, or prevention of, a specific ailment.


In the final analysis, the Commissioner, the Tax Court and my colleagues all seem to reject Mr. Ochs’ plea because of the nightmarish spectacle of opening the floodgates to cases involving expense for cooks, governesses, baby-sitters, nourishing food, clothing, frigidaires, electric dish-washers – in short, allowances as medical expenses for everything ‘helpful to a convalescent housewife or to one who is nervous or weak from past illness.’ I, for one, trust the Commissioner to make short shrift of most such claims. [footnote omitted] The tests should be: Would the taxpayer, considering his income and his living standard, normally spend money in this way regardless of illness? Has he enjoyed such luxuries or services in the past? Did a competent physician prescribe this specific expense as an indispensable part of the treatment? Has the taxpayer followed the physician’s advice in most economical way possible? Are the so-called medical expenses over and above what the patient would have to pay anyway for his living expenses, i.e., room, board, etc? Is the treatment closely geared to a particular condition and not just to the patient’s general good health or well-being?

My colleagues are particularly worried about family expenses, traditionally nondeductible, passing as medical expenses. They would classify the children’s schooling here as a family expense, because, they say, it resulted from the loss of the wife’s services. I think they are mistaken. The Tax Court specifically found that the children were sent away so they would not bother the wife, and not because there was no one to take care of them. Och’s expenditures fit into the Congressional test for medical deductions because he was compelled to go to the expense of putting the children away primarily for the benefit of his sick wife. Expenses incurred solely because of the loss of the patient’s services and not as a part of his cure are a different thing altogether. Wendell v. Commissioner, 12 T.C. 161, for instance, disallowed a deduction for the salary of a nurse engaged in caring for a healthy infant whose mother had died in childbirth. The case turned on the simple fact that, where there is no patient, there can be no deduction.

Thus, even here, expense attributed solely to the education, at least of the older child, should not be included as a medical expense. SeeStringham v. Commissioner, supra. Nor should care of the children during that part of the day when the mother would be away, during the period while she was working part-time. Smith v. Commissioner, 40 B.T.A. 1038, aff’d 2d Cir., 113 F.2d 114. The same goes for any period when the older child would be away at public school during the day. In so far as the costs of this private schooling are thus allocable, I would limit the deductible expense to the care of the children at the times when they would otherwise be around the mother. ...


Notes and Questions:

1. Is the rationale offered by the court consistent with the tax rules concerning imputed income?

  • Does the rationale seem a bit reminiscent of the rationale in Smith?

2. What caused taxpayer to have to incur the expenses on his relatively modest income of sending the children to boarding school?

  • Would taxpayers have had to bear these expenses if they did not have children?
  • Would taxpayers have had to bear these expenses if Mrs. Ochs did not have throat cancer?

3. How much discretion did taxpayer have in incurring the particular expense in Ochs? If taxpayer had paid for Mrs. Ochs to reside in a sanitarium, that expense would qualify as a medical expense.

4. Consider: Prior to 1962 Mrs. Gerstacker had a history of emotional-mental problems which had grown gradually worse. In 1962 she ran away from mental hospitals twice after voluntarily entering them. Her doctors advised Mr. Gerstacker that successful treatment required continuing control of the doctors so that Mrs. Gerstacker could not leave and disrupt her therapy. They recommended guardianship proceedings and hospitalization in Milwaukee Sanitarium, Wauwatosa, Wisconsin. Mr. Gerstacker instituted guardianship proceedings. Both Mr. and Mrs. Gerstacker employed attorneys. The court appointed guardians. Mrs. Gerstacker was hospitalized from 1962 until the latter part of 1963 when she was released by her doctors for further treatment on an out-patient basis. The guardianship was then terminated on the recommendation of her doctors because it was no longer necessary due to improved condition of the patient.

  • Should the legal expenses for establishing, conducting, and terminating the guardianship be deductible as medical expenses? For whose benefit were the expenses incurred?
  • SeeGerstacker v. Commissioner, 414 F.2d 448 (6th Cir. 1969).


5. Do the CALI Lesson, Basic Federal Income Taxation: Medical Expense Deductions. Do not worry about question17. The floor is now 10%.