General health.-Amounts paid for the preservation of your general health or for the alleviation of physical or mental discomfort, which is not related to some particular disease or defect, are not medical expenses. Examples of such expenses are: dues for health clubs, Y.M.C.A. dues, steam baths and vacations.

Maternity clothing, etc.-You may not include as medical expense the cost of maternity clothing, antiseptic diaper service, etc.

Funeral and burial expenses are not medical expenses.

Child care. You may not include as medical expense salary paid to a practical nurse for the care of a normal and healthy baby, including one whose mother died in childbirth. See Chapter 36 if you paid for care of children and other dependents in order to be gainfully employed.

SPOUSE, DEPENDENTS AND OTHERS

Expense of spouse.-Medical and dental expenses paid for your spouse may be considered only if you were married at the close of your tax year in which either (1) the expenses were incurred or (2) the expenses were paid. In the case of death, you must have been married at the date of death. Thus, if in July 1958, you pay medical expenses your wife incurred in 1957, you may deduct them in 1958, even though you were not married until after she incurred them.

Dependents. You may include, in computing your medical expense deduction, amounts paid on behalf of a dependent or a person who could be claimed as a dependent except for the fact that he or she had income of $600 or more or filed a joint return with his or her spouse. The above status must exist either at the time the expenses were incurred or at the time they were paid.

Example 1.-In 1958, you furnished more than 1/2 the support of your son, including medical expense of $800. Your son, age 22, is not a student and earned over $600 during 1958. Since he earned over $600 you are not entitled to claim him as a dependent for purposes of a $600 dependency exemption. Nevertheless, you may include the $800 medical expense paid on behalf of your son.

Example 2.-In 1958, you furnished more than half the support of your married daughter, including medical expenses of $1,200. She and her husband filed a joint return for 1958. For this reason, you are not entitled to claim an exemption for her. Nevertheless, in computing your medical expenses, you may include the $1,200 medical expense paid for her.

Community-property States.-If you and your wife reside in a community property State and file separate returns, amounts paid out of community funds for the medical care of either of you are considered as having been paid 12 by each. However, if the medical expenses are paid out of the separate funds of either, only the one paying the medical expenses may claim the deduction.

HOW TO COMPUTE DEDUCTION

Medical and dental expenses are deducted only to the extent they exceed 3% of your Adjusted Gross Income (line 11, page 1, Form 1040). If either you or your spouse are 65 or over, see Age 65 or Over.

Medicines and drugs are included in medical expenses only to the extent they exceed 1% of your Adjusted Gross Income.

For example, if your Adjusted Gross Income was $8,000 and your costs for medicines and drugs were $80 or less they would not be included as medical expenses. If your costs for medicines and drugs were $81, $1.00 would be added to the other medical expenses to determine if the total was over $240 (3% of $8,000).

To further illustrate, suppose your Adjusted Gross Income was $9,000, your medicines and drugs cost $127 and you paid other medical expenses of $340. You could deduct $107 as medical expenses computed as follows:

Itemize deductions.-You may claim a medical expense deduction only if you itemize your deductions on page 2 of Form 1040. You may not claim a deduction if you use Form 1040A, the Tax Table, or claim the Standard Deduction.

Maximum deduction.-Your deduction for medical expenses may not exceed $2,500 multiplied by the number of your exemptions, including your spouse and dependents but not counting exemptions for age or blindness. But, in no case may you claim more than: (a) $5,000 if you are single and not a head of household or a surviving spouse, as defined in Chapter 5; (b) $5,000 if you are married but file a separate return; or (c) $10,000 if you file a joint return, or are a head of household or a surviving spouse. But see Age 65 or Over.

AGE 65 OR OVER

If either you or your spouse are 65 or over before the close of your tax year, you may claim your medical expenses for the care of both of you without reduction by 3% of Adjusted Gross Income. Being 65 does not affect the rules relative to your deducting medical expenses for your dependents.

Maximum deduction.-If you are 65 or over and disabled, are single or married and file a separate return, you may deduct medical and dental expenses not in excess of $15,000. If you are 65 or over and disabled and file a joint return the limitation is still $15,000. However, if both you and your wife are 65 or over and both are disabled the maximum allowance is $30,000, but no more than $15,000 of the medical and dental expenses of each may be taken into account. If you are a head of a household or a surviving husband or wife, you are 65 or over and are disabled, you may deduct such expenses not in excess of $15,000.

A person is considered disabled if he is unable to engage in any substantial gainful activity because of medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. The determination of whether you are disabled is made as of the close of your tax year. However, if your wife or husband dies during such year the determination is made as of the date of death.

If you are not considered disabled under these rules, your maximum deduction is the same as for persons under 65. See how to compute deduction, above.

Medicines and drugs.-Even though you or your spouse are 65 or over, you may deduct, as medical expense, amounts paid for medicines and drugs only to the extent they exceed 1% of Adjusted Gross Income. If you pay for medicines for yourself or your spouse and also for a dependent, you must apportion the 1% of Adjusted Gross Income between yourself, your spouse and the dependent.

Example.-Frank and Evelyn Jones paid the following medical expenses during 1958: (a) $739.72 in hospital and doctors bills and $200.00 for drugs and medicines for themselves; (b) $100.00 for doctors and $50.00 for drugs and medicines for their dependent Grace Smith. Their Adjusted Gross Income is $17,890.14. Frank Jones had reached his 65th birthday during 1958. The 1% exclusion for medicine (1% of $17,890.14 $178.90) must be allocated 200/250 of $178.90 or $143.12 to Mr. and Mrs. Jones, and 50/250 of $178.90 or $35.78 to the dependent. The medical expense deduction is as follows:

Frank entered the amount allowable on page 2 of their return as shown in the filled-in tax return on page 4 of this booklet. They attached an itemized list showing the various amounts paid to doctors and hospitals.

REIMBURSED EXPENSES

Your total medical expenses for the year must be reduced by the aggregate reimbursements received from insurance or other sources. You need not reduce medical expenses for amounts received as reimbursements for loss of earnings or damages for personal injuries.

Example.-Suppose you paid medical expenses of $684 in 1958. You received reimbursement of $285 from group hospitalization insurance and your Adjusted Gross Income was $8,400. Your deduction would be $147, computed as follows:

Reimbursement received in later year.-If you were allowed a medical expense deduction in one year and are reimbursed for all or a part of such medical expenses in a later year, you must include the reimbursement in Gross Income in the year received, to the extent the medical expense deduction in the prior year would have been reduced had the reimbursement been received in the year of the deduction.

Example 1.-You had Adjusted Gross Income in 1957 of $10,000. During that year you paid medical expenses of $1,000 and spent less than $100 for medicines and drugs. You deducted $700, computed as follows:

Total expenses paid in 1957-

Less 3% of Adjusted Gross Income__.

Allowable deduction____.

$1,000

300

700

In 1958, you collected $400 insurance as reimbursement for part of your 1957 medical expenses. Had you collected the insurance in 1957

your deduction for medical expenses would have been only $300. (Total expenses, $1,000, less insurance proceeds. $400, less 3% of Adjusted Gross Income, $300, equals $300.) The entire reimbursement of $400 is included in income in 1958 because it is not more than the amount by which the 1957 deduction of $700 exceeds the deduction which would have been allowed, $300, had the reimbursement been received in 1957.

Example 2.-David Breen was single and had no dependents. He reported Adjusted Gross Income of $8,000 in 1957. During that year he claimed the $2,500 maximum deduction for medical expenses. (See maximum deduction.) He computed his deduction as follows:

In 1958 he collected $1,000 insurance as reimbursement for part of his 1957 medical expenses. None of the $1,000 is taxed because, even if he had collected it in 1957, he still would have had an allowable deduction of $2,500. (Medical expenses $5,000, less reimbursement $1,000, less 3% of Adjusted Gross Income, $240, equals $3,760-allowable deduction, $2,500.)

However, if he were reimbursed $3,000 in 1958, he would report taxable income of $740:

Reimbursements received after taking standard deduction.-If you did not deduct medical expenses in an earlier year, the reimbursements received for those expenses during the tax year are not taxable income. This occurs where you filed a return on Form 1040A in the year of the medical expense payment or you used the Tax Table or the Standard Deduction in Form 1040.

TITLE 29-LABOR

Chapter 4-Vocational Rehabilitation of Persons Injured in

Industry

Vocational rehabili

§ 31. Appropriations for grants; purposes for which available. For the purpose of assisting the States in rehabilitating physically tion, appropria handicapped individuals so that they may prepare for and engage tions. in remunerative employment to the extent of their capabilities, thereby increasing not only their social and economic well-being but also the productive capacity of the Nation, there are authorized to be appropriated for the fiscal year ending June 30, 1955, the sum of $30,000,000, for the fiscal year ending June 30, 1956, the sum of $45,000,000, for the fiscal year ending June 30, 1957, the sum of $55,000,000, for the fiscal year ending June 30, 1958, the sum of $65,000,000, and for each fiscal year thereafter such sums as Congress may determine, for grants to carry out the purposes of sections 31-42 of this title. The sums so appropriated for any fiscal year shall be available for

(1) grants to States under section 32 of this title to assist them in meeting the costs of vocational rehabilitation services;

(2) grants to States under section 33 of this title to assist them in initiating projects for the extension and improvement of their vocational rehabilitation services; and

(3) grants to States and to public and other nonprofit organizations and agencies under section 34 of this title to assist in meeting the costs of projects for research, demonstrations, training, and traineeships, and special projects, which hold promise of making a substantial contribution to the solution of vocational rehabilitation problems common to a number of States, including temporary assistance in initiating a substantial nationwide expansion of vocational rehabilitation programs in the States.

The portion of such sums which shall be available for each of such three types of grants shall be specified in the Act appropriating such sums, except that the first $23,000,000 of the aggregate sums so appropriated for any fiscal year shall be available for grants to States under section 32 of this title to assist them in meeting the costs of vocational rehabilitation services.

§ 32. Grants to States for vocational rehabilitation services—(a) Computation of allotments.

States.

(1) From the sums available for any fiscal year for grants to States Same: Grants to to assist them in meeting the costs of vocational rehabilitation services, each State shall be entitled to an allotment of an amount which bears the same ratio to such sums as the product of (A) the population of the State and (B) the square of its allotment percentage (as defined in section 41 (h) of this title) bears to the sum of the corresponding products for all the States.

(2) The allotment to any State for any fiscal year, as computed under the provisions of paragraph (1) of this subsection, which is less than such State's base allotment, shall, notwithstanding such provisions, be increased to the amount of such base allotment.

(3) For the purposes of this section, a State's base allotment is an amount equal to the amount allotted to such State for expenditures,