Rev. Rul. 63-101

Advice has been requested whether a taxpayer who has never been employed or engaged in substantial gainful activity within the meaning of section 1.213-2(c)(1) of the regulations is entitled to deduct medical expenses subject to the maximum limitations provided by section 213(g) of the Internal Revenue Code of 1954.

The taxpayer, a widow, is over 65 years of age and permanently disabled. She has never previously been employed or engaged in any gainful activity. As a result of her permanent disability, she will never be able to engage in any substantial gainful activity in the future. During the taxable year, she paid substantial expenses which qualify as medical expenses.

Section 213(g) of the Code provides a maximum limitation of $20,000 on the deduction for medical expenses if the taxpayer is age 65 or over and is disabled, or if the taxpayer's spouse meets the same conditions and they file a joint return. If both the taxpayer and his spouse are age 65 or over and disabled, and file a joint return, the maximum limitation is $40,000, but no more than $20,000 of the medical expenses of each may be taken into account. 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.

In determining whether an individual's impairment makes him unable to engage in any substantial gainful activity, primary consideration shall be given to the nature and severity of his impairment. Consideration shall also be given to other factors such as the individual's education, training, and work experience. The substantial gainful activity to which section 213(g) of the Code refers is the activity, or a comparable activity, in which the individual customarily engaged prior to the arising of the disability (or prior to retirement if the individual was retired at the time the disability arose). Section 1.213-2 of the Income Tax Regulations.

Where an individual is otherwise entitled to the benefit of the increased deduction for medical expenses provided by section 213(g) of the Code, the fact that he has never previously been employed or engaged in any substantial gainful activity does not prevent the allowance of the deduction subject to the maximum limitation normally available under section 213(g) of the Code.

Accordingly, it is held that the maximum limitation for medical expenses provided by section 213(g) of the Internal Revenue Code of 1954 applies to a taxpayer age 65 or over and disabled, even though such taxpayer has never been engaged in any substantial gainful activity. Therefore, the taxpayer in the instant case may deduct medical expenses paid during the taxable year, subject to the maximum limitations provided by section 213(g) of the Code.