Code Section 105
|Code Section||Effective Date||Name of Act||Name of Provision||10yr Revenue Estimate ($millions)|
|105, 106, 220 and 223||12/31/2010||Patient Protection and Affordable Care Act||Distributions for Medicine Qualified Only if for Prescribed Drug or Insulin||5,000|
|105, 162, 401, and 501||3/30/2010||Health Care and Education Reconciliation Act of 2010||Adult Dependents||*See Note Below|
*Notes on Revenue Estimate
See table 3 of CBO estimate letter addressed to Speaker Pelosi on March 20, 2010, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf
Distributions for Medicine Qualified Only if for PrescribedDrug or Insulin
Explanation of Provision
Under the provision, with respect to medicines, the definition of medical expense for purposes of employer-provided health coverage (including HRAs and Health FSAs), HSAs, and Archer MSAs, is conformed to the definition for purposes of the itemized deduction for medical expenses, except that prescribed drug is determined without regard to whether the drug is available without a prescription. Thus, under the provision, the cost of over-the-counter medicines may not be reimbursed with excludible income through a Health FSA, HRA, HSA, or Archer MSA, unless the medicine is prescribed by a physician.
Explanation of Provision
The provision amends section 105(b) to extend the general exclusion for reimbursements for medical care expenses under an employer- provided accident or health plan to any child of an employee who has not attained age 27 as of the end of the taxable year. This change is also intended to apply to the exclusion for employerproved coverage under an accident or health plan for injuries or sickness for such a child. A parallel change is made for VEBAs and 401(h) accounts.
The provision similarly amends section 162(l) to permit self-employed individuals to take a deduction for the cost of health insurance for any child of the taxpayer who has not attained age 27 as of the end of the taxable year.
For purposes of the provision, ‘‘child’’ means an individual who is a son, daughter, stepson, stepdaughter or eligible foster child of the taxpayer.973 An eligible foster child means an individual who is placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.
973- Sec. 152(f)(1). Under section 152(f)(1), a legally adopted child of the taxpayer or an individual who is lawfully placed with the taxpayer for legal adoption by the taxpayer is treated as a child of the taxpayer by blood.
-Return to Explanation of Provision
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