26 USC 211 - Allowance of deductions

Collapse to view only § 211. Allowance of deductions

§ 211. Allowance of deductions
§ 212. Expenses for production of income
§ 213. Medical, dental, etc., expenses
[§ 214. Repealed.
[§ 215. Repealed.
§ 216. Deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder
§ 217. Moving expenses
[§ 218. Repealed.
§ 219. Retirement savings
§ 220. Archer MSAs
§ 221. Interest on education loans
[§ 222. Repealed.
§ 223. Health savings accounts
§ 224. Cross reference

§ 211. Allowance of deductions

In computing taxable income under section 63, there shall be allowed as deductions the items specified in this part, subject to the exceptions provided in part IX (section 261 and following, relating to items not deductible).

(Aug. 16, 1954, ch. 736, 68A Stat. 69; Pub. L. 95–30, title I, § 102(b)(3), May 23, 1977, 91 Stat. 137.)

§ 212. Expenses for production of income

In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year—

(1) for the production or collection of income;

(2) for the management, conservation, or maintenance of property held for the production of income; or

(3) in connection with the determination, collection, or refund of any tax.

(Aug. 16, 1954, ch. 736, 68A Stat. 69.)

§ 213. Medical, dental, etc., expenses

(a) Allowance of deduction

(span) Limitation with respect to medicine and drugs

(1) Treatment of expenses paid after death

(2) LimitationParagraph (1) shall not apply if the amount paid is allowable under section 2053 as a deduction in computing the taxable estate of the decedent, but this paragraph shall not apply if (within the time and in the manner and form prescribed by the Secretary) there is filed—

(A) a statement that such amount has not been allowed as a deduction under section 2053, and

(B) a waiver of the right to have such amount allowed at any time as a deduction under section 2053.

(d) DefinitionsFor purposes of this section—

(1) The term “medical care” means amounts paid—

(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,

(B) for transportation primarily for and essential to medical care referred to in subparagraph (A),

(D) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B(span)).

In the case of a qualified long-term care insurance contract (as defined in section 7702B(span)), only eligible long-term care premiums (as defined in paragraph (10)) shall be taken into account under subparagraph (D).

(2)Amounts paid for certain lodging away from home treated as paid for medical care.—Amounts paid for lodging (not lavish or extravagant under the circumstances) while away from home primarily for and essential to medical care referred to in paragraph (1)(A) shall be treated as amounts paid for medical care if—

(A) the medical care referred to in paragraph (1)(A) is provided by a physician in a licensed hospital (or in a medical care facility which is related to, or the equivalent of, a licensed hospital), and

(B) there is no significant element of personal pleasure, recreation, or vacation in the travel away from home.

The amount taken into account under the preceding sentence shall not exceed $50 for each night for each individual.

(3)Prescribed drug.—The term “prescribed drug” means a drug or biological which requires a prescription of a physician for its use by an individual.

(4)Physician.—The term “physician” has the meaning given to such term by section 1861(r) of the Social Security Act (42 U.S.C. 1395x(r)).

(5)Special rule in the case of child of divorced parents, etc.—Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this section.

(6) In the case of an insurance contract under which amounts are payable for other than medical care referred to in subparagraphs (A), (B), and (C) of paragraph (1)—

(A) no amount shall be treated as paid for insurance to which paragraph (1)(D) applies unless the charge for such insurance is either separately stated in the contract, or furnished to the policyholder by the insurance company in a separate statement,

(B) the amount taken into account as the amount paid for such insurance shall not exceed such charge, and

(C) no amount shall be treated as paid for such insurance if the amount specified in the contract (or furnished to the policyholder by the insurance company in a separate statement) as the charge for such insurance is unreasonably large in relation to the total charges under the contract.

(7) Subject to the limitations of paragraph (6), premiums paid during the taxable year by a taxpayer before he attains the age of 65 for insurance covering medical care (within the meaning of subparagraphs (A), (B), and (C) of paragraph (1)) for the taxpayer, his spouse, or a dependent after the taxpayer attains the age of 65 shall be treated as expenses paid during the taxable year for insurance which constitutes medical care if premiums for such insurance are payable (on a level payment basis) under the contract for a period of 10 years or more or until the year in which the taxpayer attains the age of 65 (but in no case for a period of less than 5 years).

(8) The determination of whether an individual is married at any time during the taxable year shall be made in accordance with the provisions of section 6013(d) (relating to determination of status as husband and wife).

(9)Cosmetic surgery.—

(A)In general.—The term “medical care” does not include cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease.

(B)Cosmetic surgery defined.—For purposes of this paragraph, the term “cosmetic surgery” means any procedure which is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.

(10)Eligible long-term care premiums.—

(A)In general.—For purposes of this section, the term “eligible long-term care premiums” means the amount paid during a taxable year for any qualified long-term care insurance contract (as defined in section 7702B(span)) covering an individual, to the extent such amount does not exceed the limitation determined under the following table:

In the case of an individual with an attained age before the close of the taxable year of:	The limitation is:
40 or less	$ 200
More than 40 but not more than 50	375
More than 50 but not more than 60	750
More than 60 but not more than 70	2,000
More than 70	2,500.

(B)Indexing.—

(i)In general.—In the case of any taxable year beginning in a calendar year after 1997, each dollar amount contained in subparagraph (A) shall be increased by the medical care cost adjustment of such amount for such calendar year. If any increase determined under the preceding sentence is not a multiple of $10, such increase shall be rounded to the nearest multiple of $10.

(ii)Medical care cost adjustment.—For purposes of clause (i), the medical care cost adjustment for any calendar year is the percentage (if any) by which—(I) the medical care component of the C-CPI-U (as defined in section 1(f)(6)) for August of the preceding calendar year, exceeds(II) such component of the CPI (as defined in section 1(f)(4)) for August of 1996, multiplied by the amount determined under section 1(f)(3)(B).

The Secretary shall, in consultation with the Secretary of Health and Human Services, prescribe an adjustment which the Secretary determines is more appropriate for purposes of this paragraph than the adjustment described in the preceding sentence, and the adjustment so prescribed shall apply in lieu of the adjustment described in the preceding sentence.

(11)Certain payments to relatives treated as not paid for medical care.—An amount paid for a qualified long-term care service (as defined in section 7702B(c)) provided to an individual shall be treated as not paid for medical care if such service is provided—

(A) by the spouse of the individual or by a relative (directly or through a partnership, corporation, or other entity) unless the service is provided by a licensed professional with respect to such service, or

(B) by a corporation or partnership which is related (within the meaning of section 267(span) or 707(span)) to the individual.

For purposes of this paragraph, the term “relative” means an individual bearing a relationship to the individual which is described in any of subparagraphs (A) through (G) of section 152(d)(2). This paragraph shall not apply for purposes of section 105(span) with respect to reimbursements through insurance.

(e) Exclusion of amounts allowed for care of certain dependents

(Aug. 16, 1954, ch. 736, 68A Stat. 69; Puspan. L. 85–866, title I, §§ 16, 17(a), (span), Sept. 2, 1958, 72 Stat. 1613, 1614; Puspan. L. 86–470, § 3(a), May 14, 1960, 74 Stat. 133; Puspan. L. 87–863, § 1(a), (span), Oct. 23, 1962, 76 Stat. 1141; Puspan. L. 88–272, title II, § 211(a), Fespan. 26, 1964, 78 Stat. 49; Puspan. L. 89–97, title I, § 106(a)–(d)(1), July 30, 1965, 79 Stat. 336, 337; Puspan. L. 94–455, title V, § 504(c)(1), title XIX, § 1906(span)(13)(A), Oct. 4, 1976, 90 Stat. 1565, 1834; Puspan. L. 97–248, title II, § 202(a)–(span)(3)(B), Sept. 3, 1982, 96 Stat. 421; Puspan. L. 98–369, div. A, title IV, §§ 423(span)(1), (3), 474(r)(9), 482(a), (span)(1), title VII, § 711(span), July 18, 1984, 98 Stat. 800, 841, 847, 848, 943; Puspan. L. 99–514, title I, § 133, Oct. 22, 1986, 100 Stat. 2116; Puspan. L. 101–508, title XI, §§ 11111(d)(1), 11342(a), Nov. 5, 1990, 104 Stat. 1388–412, 1388–471; Puspan. L. 103–66, title XIII, § 13131(d)(3), Aug. 10, 1993, 107 Stat. 435; Puspan. L. 104–191, title III, § 322(a)–(span)(2)(A), (C), (3), (4), Aug. 21, 1996, 110 Stat. 2060–2062; Puspan. L. 108–311, title II, § 207(17), (18), Oct. 4, 2004, 118 Stat. 1177; Puspan. L. 111–148, title IX, § 9013(a), (span), Mar. 23, 2010, 124 Stat. 868; Puspan. L. 115–97, title I, §§ 11002(d)(7), 11027(a), Dec. 22, 2017, 131 Stat. 2061, 2077; Puspan. L. 116–94, div. Q, title I, § 103(a), Dec. 20, 2019, 133 Stat. 3228; Puspan. L. 116–260, div. EE, title I, § 101(a), Dec. 27, 2020, 134 Stat. 3039.)

[§ 214. Repealed. Pub. L. 94–455, title V, § 504(b)(1), Oct. 4, 1976, 90 Stat. 1565]

[§ 215. Repealed. Pub. L. 115–97, title I, § 11051(a), Dec. 22, 2017, 131 Stat. 2089]

§ 216. Deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder

(a) Allowance of deductionIn the case of a tenant-stockholder (as defined in subsection (b)(2)), there shall be allowed as a deduction amounts (not otherwise deductible) paid or accrued to a cooperative housing corporation within the taxable year, but only to the extent that such amounts represent the tenant-stockholder’s proportionate share of—

(1) the real estate taxes allowable as a deduction to the corporation under section 164 which are paid or incurred by the corporation on the houses or apartment building and on the land on which such houses (or building) are situated, or

(2) the interest allowable as a deduction to the corporation under section 163 which is paid or incurred by the corporation on its indebtedness contracted—

(A) in the acquisition, construction, alteration, rehabilitation, or maintenance of the houses or apartment building, or

(B) in the acquisition of the land on which the houses (or apartment building) are situated.

(b) DefinitionsFor purposes of this section—

(1) Cooperative housing corporationThe term “cooperative housing corporation” means a corporation—

(A) having one and only one class of stock outstanding,

(B) each of the stockholders of which is entitled, solely by reason of his ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building, owned or leased by such corporation,

(C) no stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except on a complete or partial liquidation of the corporation, and

(D) meeting 1 or more of the following requirements for the taxable year in which the taxes and interest described in subsection (a) are paid or incurred:

(i) 80 percent or more of the corporation’s gross income for such taxable year is derived from tenant-stockholders.

(ii) At all times during such taxable year, 80 percent or more of the total square footage of the corporation’s property is used or available for use by the tenant-stockholders for residential purposes or purposes ancillary to such residential use.

(iii) 90 percent or more of the expenditures of the corporation paid or incurred during such taxable year are paid or incurred for the acquisition, construction, management, maintenance, or care of the corporation’s property for the benefit of the tenant-stockholders.

(2) Tenant-stockholder

(3) Tenant-stockholder’s proportionate share

(A) In general

(B) Special rule where allocation of taxes or interest reflect cost to corporation of stockholder’s unit

(i) In generalIf, for any taxable year—(I) each dwelling unit owned or leased by a cooperative housing corporation is separately allocated a share of such corporation’s real estate taxes described in subsection (a)(1) or a share of such corporation’s interest described in subsection (a)(2), and(II) such allocations reasonably reflect the cost to such corporation of such taxes, or of such interest, attributable to the tenant-stockholder’s dwelling unit (and such unit’s share of the common areas),

then the term “tenant-stockholder’s proportionate share” means the shares determined in accordance with the allocations described in subclause (II).

(ii) Election by corporation required

(4) Stock owned by governmental units

(5) Prior approval of occupancyFor purposes of this section, in the following cases there shall not be taken into account the fact that (by agreement with the cooperative housing corporation) the person or his nominee may not occupy the house or apartment without the prior approval of such corporation:

(A) In any case where a person acquires stock of a cooperative housing corporation by operation of law.

(B) In any case where a person other than an individual acquires stock of a cooperative housing corporation.

(C) In any case where the original seller acquires any stock of the cooperative housing corporation from the corporation not later than 1 year after the date on which the apartments or houses (or leaseholds therein) are transferred by the original seller to the corporation.

(6) Original seller defined

(1) In general

(2) Deduction limited to adjusted basis in stock

(A) In general

(B) Carryforward of disallowed amount

(d) Disallowance of deduction for certain payments to the corporation

(e) Distributions by cooperative housing corporations

(Aug. 16, 1954, ch. 736, 68A Stat. 71; Pub. L. 87–834, § 28(a), Oct. 16, 1962, 76 Stat. 1068; Pub. L. 91–172, title IX, § 913(a), Dec. 30, 1969, 83 Stat. 723; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), title XXI, § 2101(b), (f)(1), Oct. 4, 1976, 90 Stat. 1834, 1899; Pub. L. 95–600, title V, § 531(a), Nov. 6, 1978, 92 Stat. 2886; Pub. L. 96–222, title I, § 105(a)(6), Apr. 1, 1980, 94 Stat. 219; Pub. L. 99–514, title VI, § 644(a)–(d), Oct. 22, 1986, 100 Stat. 2285, 2286; Pub. L. 100–647, title VI, § 6282(a), Nov. 10, 1988, 102 Stat. 3755; Pub. L. 101–508, title XI, § 11702(i), Nov. 5, 1990, 104 Stat. 1388–516; Pub. L. 105–34, title III, § 312(d)(4), Aug. 5, 1997, 111 Stat. 840; Pub. L. 110–142, § 4(a), Dec. 20, 2007, 121 Stat. 1804.)

§ 217. Moving expenses

(a) Deduction allowed

(b) Definition of moving expenses

(1) In generalFor purposes of this section, the term “moving expenses” means only the reasonable expenses—

(A) of moving household goods and personal effects from the former residence to the new residence, and

(B) of traveling (including lodging) from the former residence to the new place of residence.

Such term shall not include any expenses for meals.

(2) Individuals other than taxpayer

(1) the taxpayer’s new principal place of work—

(A) is at least 50 miles farther from his former residence than was his former principal place of work, or

(B) if he had no former principal place of work, is at least 50 miles from his former residence, and

(2) either—

(A) during the 12-month period immediately following his arrival in the general location of his new principal place of work, the taxpayer is a full-time employee, in such general location, during at least 39 weeks, or

(B) during the 24-month period immediately following his arrival in the general location of his new principal place of work, the taxpayer is a full-time employee or performs services as a self-employed individual on a full-time basis, in such general location, during at least 78 weeks, of which not less than 39 weeks are during the 12-month period referred to in subparagraph (A).

For purposes of paragraph (1), the distance between two points shall be the shortest of the more commonly traveled routes between such two points.

(d) Rules for application of subsection (c)(2)

(1) The condition of subsection (c)(2) shall not apply if the taxpayer is unable to satisfy such condition by reason of—

(A) death or disability, or

(B) involuntary separation (other than for willful misconduct) from the service of, or transfer for the benefit of, an employer after obtaining full-time employment in which the taxpayer could reasonably have been expected to satisfy such condition.

(2) If a taxpayer has not satisfied the condition of subsection (c)(2) before the time prescribed by law (including extensions thereof) for filing the return for the taxable year during which he paid or incurred moving expenses which would otherwise be deductible under this section, but may still satisfy such condition, then such expenses may (at the election of the taxpayer) be deducted for such taxable year notwithstanding subsection (c)(2).

(3) If—

(A) for any taxable year moving expenses have been deducted in accordance with the rule provided in paragraph (2), and

(B) the condition of subsection (c)(2) cannot be satisfied at the close of a subsequent taxable year,

then an amount equal to the expenses which were so deducted shall be included in gross income for the first such subsequent taxable year.

[(e) Repealed. Pub. L. 103–66, title XIII, § 13213(a)(2)(A), Aug. 10, 1993, 107 Stat. 473]

(f) Self-employed individualFor purposes of this section, the term “self-employed individual” means an individual who performs personal services—

(1) as the owner of the entire interest in an unincorporated trade or business, or

(2) as a partner in a partnership carrying on a trade or business.

(g) Rules for members of the Armed Forces of the United StatesIn the case of a member of the Armed Forces of the United States on active duty who moves pursuant to a military order and incident to a permanent change of station—

(1) the limitations under subsection (c) shall not apply;

(2) any moving and storage expenses which are furnished in kind (or for which reimbursement or an allowance is provided, but only to the extent of the expenses paid or incurred) to such member, his spouse, or his dependents, shall not be includible in gross income, and no reporting with respect to such expenses shall be required by the Secretary of Defense or the Secretary of Transportation, as the case may be; and

(3) if moving and storage expenses are furnished in kind (or if reimbursement or an allowance for such expenses is provided) to such member’s spouse and his dependents with regard to moving to a location other than the one to which such member moves (or from a location other than the one from which such member moves), this section shall apply with respect to the moving expenses of his spouse and dependents—

(A) as if his spouse commenced work as an employee at a new principal place of work at such location; and

(B) without regard to the limitations under subsection (c).

(h) Special rules for foreign moves

(1) Allowance of certain storage feesIn the case of a foreign move, for purposes of this section, the moving expenses described in subsection (b)(1)(A) include the reasonable expenses—

(A) of moving household goods and personal effects to and from storage, and

(B) of storing such goods and effects for part or all of the period during which the new place of work continues to be the taxpayer’s principal place of work.

(2) Foreign move

(3) United States defined

(i) Allowance of deductions in case of retirees or decedents who were working abroad

(1) In generalIn the case of any qualified retiree moving expenses or qualified survivor moving expenses—

(A) this section (other than subsection (h)) shall be applied with respect to such expenses as if they were incurred in connection with the commencement of work by the taxpayer as an employee at a new principal place of work located within the United States, and

(B) the limitations of subsection (c)(2) shall not apply.

(2) Qualified retiree moving expensesFor purposes of paragraph (1), the term “qualified retiree moving expenses” means any moving expenses—

(A) which are incurred by an individual whose former principal place of work and former residence were outside the United States, and

(B) which are incurred for a move to a new residence in the United States in connection with the bona fide retirement of the individual.

(3) Qualified survivor moving expensesFor purposes of paragraph (1), the term “qualified survivor moving expenses” means moving expenses—

(A) which are paid or incurred by the spouse or any dependent of any decedent who (as of the time of his death) had a principal place of work outside the United States, and

(B) which are incurred for a move which begins within 6 months after the death of such decedent and which is to a residence in the United States from a former residence outside the United States which (as of the time of the decedent’s death) was the residence of such decedent and the individual paying or incurring the expense.

(j) Regulations

(k) Suspension of deduction for taxable years 2018 through 2025

(Added Pub. L. 88–272, title II, § 213(a)(1), Feb. 26, 1964, 78 Stat. 50; amended Pub. L. 91–172, title II, § 231(a), Dec. 30, 1969, 83 Stat. 577; Pub. L. 94–455, title V, § 506 (a)–(c), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1568, 1834; Pub. L. 95–615, title II, § 204, Nov. 8, 1978, 92 Stat. 3106; Pub. L. 103–66, title XIII, § 13213(a)(1)–(2)(D), (b), Aug. 10, 1993, 107 Stat. 473, 474; Pub. L. 115–97, title I, § 11049(a), Dec. 22, 2017, 131 Stat. 2088.)

[§ 218. Repealed. Pub. L. 95–600, title I, § 113(a)(1), Nov. 6, 1978, 92 Stat. 2778]

§ 219. Retirement savings

(a) Allowance of deduction

(b) Maximum amount of deduction

(1) In generalThe amount allowable as a deduction under subsection (a) to any individual for any taxable year shall not exceed the lesser of—

(A) the deductible amount, or

(B) an amount equal to the compensation includible in the individual’s gross income for such taxable year.

(2) Special rule for employer contributions under simplified employee pensions

(3) Plans under section 501(c)(18)Notwithstanding paragraph (1), the amount allowable as a deduction under subsection (a) with respect to any contributions on behalf of an employee to a plan described in section 501(c)(18) shall not exceed the lesser of—

(A) $7,000, or

(B) an amount equal to 25 percent of the compensation (as defined in section 415(c)(3)) includible in the individual’s gross income for such taxable year.

(4) Special rule for simple retirement accounts

(5) Deductible amountFor purposes of paragraph (1)(A)—

(A) In general

(B) Catch-up contributions for individuals 50 or older

(i) In general

(ii) Applicable amount

(i) In generalIn the case of any taxable year beginning in a calendar year after 2008, the $5,000 amount under subparagraph (A) shall be increased by an amount equal to—(I) such dollar amount, multiplied by(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2007” for “calendar year 2016” in subparagraph (A)(ii) thereof.

(ii) Rounding rules

(iii) Indexing of catch-up limitationIn the case of any taxable year beginning in a calendar year after 2023, the $1,000 amount under subparagraph (B)(ii) shall be increased by an amount equal to—(I) such dollar amount, multiplied by(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2022” for “calendar year 2016” in subparagraph (A)(ii) thereof.

If any amount after adjustment under the preceding sentence is not a multiple of $100, such amount shall be rounded to the next lower multiple of $100.

(1) In generalIn the case of an individual to whom this paragraph applies for the taxable year, the limitation of paragraph (1) of subsection (b) shall be equal to the lesser of—

(A) the dollar amount in effect under subsection (b)(1)(A) for the taxable year, or

(B) the sum of—

(i) the compensation includible in such individual’s gross income for the taxable year, plus

(ii) the compensation includible in the gross income of such individual’s spouse for the taxable year reduced by—(I) the amount allowed as a deduction under subsection (a) to such spouse for such taxable year,(II) the amount of any designated nondeductible contribution (as defined in section 408(o)) on behalf of such spouse for such taxable year, and(III) the amount of any contribution on behalf of such spouse to a Roth IRA under section 408A for such taxable year.

(2) Individuals to whom paragraph (1) appliesParagraph (1) shall apply to any individual if—

(A) such individual files a joint return for the taxable year, and

(B) the amount of compensation (if any) includible in such individual’s gross income for the taxable year is less than the compensation includible in the gross income of such individual’s spouse for the taxable year.

(d) Other limitations and restrictions

[(1) Repealed. Pub. L. 116–94, div. O, title I, § 107(a), Dec. 20, 2019, 133 Stat. 3148]

(2) Recontributed amounts

(3) Amounts contributed under endowment contract

(4) Denial of deduction for amount contributed to inherited annuities or accounts

(e) Qualified retirement contributionFor purposes of this section, the term “qualified retirement contribution” means—

(1) any amount paid in cash for the taxable year by or on behalf of an individual to an individual retirement plan for such individual’s benefit, and

(2) any amount contributed on behalf of any individual to a plan described in section 501(c)(18).

(f) Other definitions and special rules

(1) Compensation

(2) Married individuals

(3) Time when contributions deemed made

[(4) Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(39)(A), Dec. 19, 2014, 128 Stat. 4043]

(5) Employer payments

(6) Excess contributions treated as contribution made during subsequent year for which there is an unused limitation

(A) In generalIf for the taxable year the maximum amount allowable as a deduction under this section for contributions to an individual retirement plan exceeds the amount contributed, then the taxpayer shall be treated as having made an additional contribution for the taxable year in an amount equal to the lesser of—

(i) the amount of such excess, or

(ii) the amount of the excess contributions for such taxable year (determined under section 4973(b)(2) without regard to subparagraph (C) thereof).

(B) Amount contributedFor purposes of this paragraph, the amount contributed—

(i) shall be determined without regard to this paragraph, and

(ii) shall not include any rollover contribution.

(7) Special rule for compensation earned by members of the Armed Forces for service in a combat zone.

(8) Election not to deduct contributions

(g) Limitation on deduction for active participants in certain pension plans

(1) In general

(2) Amount of reduction

(A) In generalThe amount determined under this paragraph with respect to any dollar limitation shall be the amount which bears the same ratio to such limitation as—

(i) the excess of—(I) the taxpayer’s adjusted gross income for such taxable year, over(II) the applicable dollar amount, bears to

(ii) $10,000 ($20,000 in the case of a joint return).

(B) No reduction below $200 until complete phase-out

(3) Adjusted gross income; applicable dollar amountFor purposes of this subsection—

(A) Adjusted gross incomeAdjusted gross income of any taxpayer shall be determined—

(i) after application of sections 86 and 469, and

(ii) without regard to sections 85(c), 135, 137, 221, and 911 or the deduction allowable under this section.

(B) Applicable dollar amountThe term “applicable dollar amount” means the following:

(i) In the case of a taxpayer filing a joint return, $80,000.

(ii) In the case of any other taxpayer (other than a married individual filing a separate return), $50,000.

(iii) In the case of a married individual filing a separate return, zero.

(4) Special rule for married individuals filing separately and living apartA husband and wife who—

(A) file separate returns for any taxable year, and

(B) live apart at all times during such taxable year,

shall not be treated as married individuals for purposes of this subsection.

(5) Active participantFor purposes of this subsection, the term “active participant” means, with respect to any plan year, an individual—

(A) who is an active participant in—

(i) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),

(ii) an annuity plan described in section 403(a),

(iii) a plan established for its employees by the United States, by a State or political subdivision thereof, or by an agency or instrumentality of any of the foregoing,

(iv) an annuity contract described in section 403(b),

(v) a simplified employee pension (within the meaning of section 408(k)), or

(vi) any simple retirement account (within the meaning of section 408(p)), or

(B) who makes deductible contributions to a trust described in section 501(c)(18).

The determination of whether an individual is an active participant shall be made without regard to whether or not such individual’s rights under a plan, trust, or contract are nonforfeitable. An eligible deferred compensation plan (within the meaning of section 457(b)) shall not be treated as a plan described in subparagraph (A)(iii).

(6) Certain individuals not treated as active participantsFor purposes of this subsection, any individual described in any of the following subparagraphs shall not be treated as an active participant for any taxable year solely because of any participation so described:

(A) Members of reserve components

(B) Volunteer firefightersA volunteer firefighter—

(i) who is a participant in a plan described in subparagraph (A)(iii) of paragraph (5) based on his activity as a volunteer firefighter, and

(ii) whose accrued benefit as of the beginning of the taxable year is not more than an annual benefit of $1,800 (when expressed as a single life annuity commencing at age 65).

(7) Special rule for spouses who are not active participantsIf this subsection applies to an individual for any taxable year solely because their spouse is an active participant, then, in applying this subsection to the individual (but not their spouse)—

(A) the applicable dollar amount under paragraph (3)(B)(i) shall be $150,000; and

(B) the amount applicable under paragraph (2)(A)(ii) shall be $10,000.

(8) Inflation adjustmentIn the case of any taxable year beginning in a calendar year after 2006, each of the dollar amounts in paragraphs (3)(B)(i), (3)(B)(ii), and (7)(A) shall be increased by an amount equal to—

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2005” for “calendar year 2016” in subparagraph (A)(ii) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $1,000.

(Added Pub. L. 93–406, title II, § 2002(a)(1), Sept. 2, 1974, 88 Stat. 958; amended Pub. L. 94–455, title XV, §§ 1501(b)(4), 1503(a), title XIX, §§  1901(a)(32), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1736, 1738, 1769, 1834; Pub. L. 95–600, title I, §§ 152(c), 156(c)(3), 157(a)(1), (b)(1), title VII, § 703(c)(1), Nov. 6, 1978, 92 Stat. 2798, 2803, 2939; Pub. L. 96–222, title I, § 101(a)(10)(D), (14)(B), Apr. 1, 1980, 94 Stat. 202, 204; Pub. L. 97–34, title III, §§ 311(a), 312(c)(1), 313(b)(2), Aug. 13, 1981, 95 Stat. 274, 284, 286; Pub. L. 97–248, title II, § 243(b)(2), Sept. 3, 1982, 96 Stat. 523; Pub. L. 97–448, title I, § 103(c)(1), (2), (3)(A), (4), (5), (12)(A), Jan. 12, 1983, 96 Stat. 2375–2377; Pub. L. 98–369, div. A, title I, § 147(c), title IV, §§ 422(d)(1), 491(d)(6)–(8), title V, § 529(a), (b), title VII, § 713(d)(2), July 18, 1984, 98 Stat. 687, 798, 849, 877, 957; Pub. L. 99–514, title III, § 301(b)(4), title XI, §§ 1101(a), (b)(1), (2)(A), 1102(f), 1103(a), 1108(g)(2), (3), 1109(b), title XV, § 1501(d)(1)(B), title XVIII, § 1875(c)(4), (6)(B), Oct. 22, 1986, 100 Stat. 2217, 2411, 2413, 2417, 2434, 2435, 2740, 2894, 2895; Pub. L. 100–647, title I, § 1011(a)(1), title VI, § 6009(c)(2), Nov. 10, 1988, 102 Stat. 3456, 3690; Pub. L. 101–239, title VII, §§ 7816(c)(1), 7841(c)(1), Dec. 19, 1989, 103 Stat. 2420, 2428; Pub. L. 102–318, title V, § 521(b)(4), July 3, 1992, 106 Stat. 310; Pub. L. 103–337, div. A, title XVI, § 1677(c), Oct. 5, 1994, 108 Stat. 3020; Pub. L. 104–188, title I, §§ 1421(b)(1), 1427(a)–(b)(2), 1807(c)(3), Aug. 20, 1996, 110 Stat. 1795, 1802, 1902; Pub. L. 105–34, title III, §§ 301(a), (b), 302(c), Aug. 5, 1997, 111 Stat. 824, 825, 829; Pub. L. 105–206, title VI, §§ 6005(a), 6018(f)(2), July 22, 1998, 112 Stat. 796, 823; Pub. L. 105–277, div. J, title IV, § 4003(a)(2)(B), Oct. 21, 1998, 112 Stat. 2681–908; Pub. L. 106–554, § 1(a)(7) [title III, § 316(d)], Dec. 21, 2000, 114 Stat. 2763, 2763A–644; Pub. L. 107–16, title IV, § 431(c)(1), title VI, §§ 601(a), 641(e)(2), June 7, 2001, 115 Stat. 68, 94, 120; Pub. L. 108–357, title I, § 102(d)(1), Oct. 22, 2004, 118 Stat. 1428; Pub. L. 109–227, § 2(a), May 29, 2006, 120 Stat. 385; Pub. L. 109–280, title VIII, §§ 831(a), 833(b), Aug. 17, 2006, 120 Stat. 1002, 1004; Pub. L. 110–245, title I, § 105(b)(2), June 17, 2008, 122 Stat. 1629; Pub. L. 113–22, § 1, July 25, 2013, 127 Stat. 492; Pub. L. 113–295, div. A, title II, § 221(a)(38), (39)(A), Dec. 19, 2014, 128 Stat. 4043; Pub. L. 115–97, title I, §§ 11002(d)(1)(S), 11051(b)(3)(C), 13305(b)(1), Dec. 22, 2017, 131 Stat. 2060, 2090, 2126; Pub. L. 115–141, div. U, title IV, § 401(a)(55), (56), Mar. 23, 2018, 132 Stat. 1186; Pub. L. 116–94, div. O, title I, §§ 106(a), 107(a), Dec. 20, 2019, 133 Stat. 3148; Pub. L. 116–260, div. EE, title I, § 104(b)(2)(F), Dec. 27, 2020, 134 Stat. 3041; Pub. L. 117–2, title IX, § 9042(b)(5), Mar. 11, 2021, 135 Stat. 122; Pub. L. 117–328, div. T, title I, § 108(a), Dec. 29, 2022, 136 Stat. 5289.)

§ 220. Archer MSAs

(a) Deduction allowed

(b) Limitations

(1) In general

(2) Monthly limitationThe monthly limitation for any month is the amount equal to 1⁄12 of—

(A) in the case of an individual who has self-only coverage under the high deductible health plan as of the first day of such month, 65 percent of the annual deductible under such coverage, and

(B) in the case of an individual who has family coverage under the high deductible health plan as of the first day of such month, 75 percent of the annual deductible under such coverage.

(3) Special rule for married individualsIn the case of individuals who are married to each other, if either spouse has family coverage—

(A) both spouses shall be treated as having only such family coverage (and if such spouses each have family coverage under different plans, as having the family coverage with the lowest annual deductible), and

(B) the limitation under paragraph (1) (after the application of subparagraph (A) of this paragraph) shall be divided equally between them unless they agree on a different division.

(4) Deduction not to exceed compensation

(A) Employees

(B) Self-employed individuals

(5) Coordination with exclusion for employer contributionsNo deduction shall be allowed under this section for any amount paid for any taxable year to an Archer MSA of an individual if—

(A) any amount is contributed to any Archer MSA of such individual for such year which is excludable from gross income under section 106(b), or

(B) if such individual’s spouse is covered under the high deductible health plan covering such individual, any amount is contributed for such year to any Archer MSA of such spouse which is so excludable.

(6) Denial of deduction to dependents

(7) Medicare eligible individuals

(1) Eligible individual

(A) In generalThe term “eligible individual” means, with respect to any month, any individual if—

(i) such individual is covered under a high deductible health plan as of the 1st day of such month,

(ii) such individual is not, while covered under a high deductible health plan, covered under any health plan—(I) which is not a high deductible health plan, and(II) which provides coverage for any benefit which is covered under the high deductible health plan, and

(iii)(I) the high deductible health plan covering such individual is established and maintained by the employer of such individual or of the spouse of such individual and such employer is a small employer, or(II) such individual is an employee (within the meaning of section 401(c)(1)) or the spouse of such an employee and the high deductible health plan covering such individual is not established or maintained by any employer of such individual or spouse.

(B) Certain coverage disregardedSubparagraph (A)(ii) shall be applied without regard to—

(i) coverage for any benefit provided by permitted insurance, and

(ii) coverage (whether through insurance or otherwise) for accidents, disability, dental care, vision care, or long-term care.

(i) any amount is contributed to an Archer MSA of an individual who is an employee of such employer or the spouse of such an employee, and

(ii) such amount is excludable from gross income under section 106(b) or allowable as a deduction under this section,

such individual shall not cease to meet the requirement of subparagraph (A)(iii)(I) by reason of such employer ceasing to be a small employer so long as such employee continues to be an employee of such employer.

(D) Limitations on eligibility

(2) High deductible health plan

(A) In generalThe term “high deductible health plan” means a health plan—

(i) in the case of self-only coverage, which has an annual deductible which is not less than $1,500 and not more than $2,250,

(ii) in the case of family coverage, which has an annual deductible which is not less than $3,000 and not more than $4,500, and

(iii) the annual out-of-pocket expenses required to be paid under the plan (other than for premiums) for covered benefits does not exceed—(I) $3,000 for self-only coverage, and(II) $5,500 for family coverage.

(B) Special rules

(i) Exclusion of certain plans

(ii) Safe harbor for absence of preventive care deductible

(3) Permitted insuranceThe term “permitted insurance” means—

(A) insurance if substantially all of the coverage provided under such insurance relates to—

(i) liabilities incurred under workers’ compensation laws,

(ii) tort liabilities,

(iii) liabilities relating to ownership or use of property, or

(iv) such other similar liabilities as the Secretary may specify by regulations,

(B) insurance for a specified disease or illness, and

(4) Small employer

(A) In general

(B) Employers not in existence in preceding year

(C) Certain growing employers retain treatment as small employerThe term “small employer” includes, with respect to any calendar year, any employer if—

(i) such employer met the requirement of subparagraph (A) (determined without regard to subparagraph (B)) for any preceding calendar year after 1996,

(ii) any amount was contributed to the Archer MSA of any employee of such employer with respect to coverage of such employee under a high deductible health plan of such employer during such preceding calendar year and such amount was excludable from gross income under section 106(b) or allowable as a deduction under this section, and

(iii) such employer employed an average of 200 or fewer employees on business days during each preceding calendar year after 1996.

(D) Special rules

(i) Controlled groups

(ii) Predecessors

(5)

(d) Archer MSAFor purposes of this section—

(1) Archer MSAThe term “Archer MSA” means a trust created or organized in the United States as a medical savings account exclusively for the purpose of paying the qualified medical expenses of the account holder, but only if the written governing instrument creating the trust meets the following requirements:

(A) Except in the case of a rollover contribution described in subsection (f)(5), no contribution will be accepted—

(i) unless it is in cash, or

(ii) to the extent such contribution, when added to previous contributions to the trust for the calendar year, exceeds 75 percent of the highest annual limit deductible permitted under subsection (c)(2)(A)(ii) for such calendar year.

(B) The trustee is a bank (as defined in section 408(n)), an insurance company (as defined in section 816), or another person who demonstrates to the satisfaction of the Secretary that the manner in which such person will administer the trust will be consistent with the requirements of this section.

(D) The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund.

(E) The interest of an individual in the balance in his account is nonforfeitable.

(2) Qualified medical expenses

(A) In general

(B) Health insurance may not be purchased from account

(i) In general

(ii) ExceptionsClause (i) shall not apply to any expense for coverage under—(I) a health plan during any period of continuation coverage required under any Federal law,(II) a qualified long-term care insurance contract (as defined in section 7702B(b)), or(III) a health plan during a period in which the individual is receiving unemployment compensation under any Federal or State law.

(3) Account holder

(4) Certain rules to applyRules similar to the following rules shall apply for purposes of this section:

(A) Section 219(d)(2) (relating to no deduction for rollovers).

(B) Section 219(f)(3) (relating to time when contributions deemed made).

(D) Section 408(g) (relating to community property laws).

(E) Section 408(h) (relating to custodial accounts).

(e) Tax treatment of accounts

(1) In general

(2) Account terminations

(f) Tax treatment of distributions

(1) Amounts used for qualified medical expenses

(2) Inclusion of amounts not used for qualified medical expenses

(3) Excess contributions returned before due date of return

(A) In generalIf any excess contribution is contributed for a taxable year to any Archer MSA of an individual, paragraph (2) shall not apply to distributions from the Archer MSAs of such individual (to the extent such distributions do not exceed the aggregate excess contributions to all such accounts of such individual for such year) if—

(i) such distribution is received by the individual on or before the last day prescribed by law (including extensions of time) for filing such individual’s return for such taxable year, and

(ii) such distribution is accompanied by the amount of net income attributable to such excess contribution.

Any net income described in clause (ii) shall be included in the gross income of the individual for the taxable year in which it is received.

(B) Excess contribution

(4) Additional tax on distributions not used for qualified medical expenses

(A) In general

(B) Exception for disability or death

(5) Rollover contributionAn amount is described in this paragraph as a rollover contribution if it meets the requirements of subparagraphs (A) and (B).

(A) In general

(B) Limitation

(6) Coordination with medical expense deduction

(7) Transfer of account incident to divorce

(8) Treatment after death of account holder

(A) Treatment if designated beneficiary is spouse

(B) Other cases

(i) In generalIf, by reason of the death of the account holder, any person acquires the account holder’s interest in an Archer MSA in a case to which subparagraph (A) does not apply—(I) such account shall cease to be an Archer MSA as of the date of death, and(II) an amount equal to the fair market value of the assets in such account on such date shall be includible if such person is not the estate of such holder, in such person’s gross income for the taxable year which includes such date, or if such person is the estate of such holder, in such holder’s gross income for the last taxable year of such holder.

(ii) Special rules(I) Reduction of inclusion for pre-death expenses(II) Deduction for estate taxes

(g) Cost-of-living adjustmentIn the case of any taxable year beginning in a calendar year after 1998, each dollar amount in subsection (c)(2) shall be increased by an amount equal to—

(1) such dollar amount, multiplied by

(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins by substituting “calendar year 1997” for “calendar year 2016” in subparagraph (A)(ii) thereof.

If any increase under the preceding sentence is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.

(h) Reports

(i) Limitation on number of taxpayers having Archer MSAs

(1) In generalExcept as provided in paragraph (5), no individual shall be treated as an eligible individual for any taxable year beginning after the cut-off year unless—

(A) such individual was an active MSA participant for any taxable year ending on or before the close of the cut-off year, or

(B) such individual first became an active MSA participant for a taxable year ending after the cut-off year by reason of coverage under a high deductible health plan of an MSA-participating employer.

(2) Cut-off yearFor purposes of paragraph (1), the term “cut-off year” means the earlier of—

(A) calendar year 2007, or

(B) the first calendar year before 2007 for which the Secretary determines under subsection (j) that the numerical limitation for such year has been exceeded.

(3) Active MSA participantFor purposes of this subsection—

(A) In general

(B) Special rule for cut-off years before 2007In the case of a cut-off year before 2007—

(i) an individual shall not be treated as an eligible individual for any month of such year or an active MSA participant under paragraph (1)(A) unless such individual is, on or before the cut-off date, covered under a high deductible health plan, and

(ii) an employer shall not be treated as an MSA-participating employer unless the employer, on or before the cut-off date, offered coverage under a high deductible health plan to any employee.

(i) In general

(ii) Employees with enrollment periods after October 1

(iii) Self-employed individuals

(iv) Special rules for 1997If 1997 is a cut-off year by reason of subsection (j)(1)(A)—(I) each of the cut-off dates under clauses (i) and (iii) shall be 1 month earlier than the date determined without regard to this clause, and(II) clause (ii) shall be applied by substituting “4 months” for “3 months”.

(4) MSA-participating employerFor purposes of this subsection, the term “MSA-participating employer” means any small employer if—

(A) such employer made any contribution to the Archer MSA of any employee during the cut-off year or any preceding calendar year which was excludable from gross income under section 106(b), or

(B) at least 20 percent of the employees of such employer who are eligible individuals for any month of the cut-off year by reason of coverage under a high deductible health plan of such employer each made a contribution of at least $100 to their Archer MSAs for any taxable year ending with or within the cut-off year which was allowable as a deduction under this section.

(5) Additional eligibility after cut-off yearIf the Secretary determines under subsection (j)(2)(A) that the numerical limit for the calendar year following a cut-off year described in paragraph (2)(B) has not been exceeded—

(A) this subsection shall not apply to any otherwise eligible individual who is covered under a high deductible health plan during the first 6 months of the second calendar year following the cut-off year (and such individual shall be treated as an active MSA participant for purposes of this subsection if a contribution is made to any Archer MSA with respect to such coverage), and

(B) any employer who offers coverage under a high deductible health plan to any employee during such 6-month period shall be treated as an MSA-participating employer for purposes of this subsection if the requirements of paragraph (4) are met with respect to such coverage.

For purposes of this paragraph, subsection (j)(2)(A) shall be applied for 1998 by substituting “750,000” for “600,000”.

(j) Determination of whether numerical limits are exceeded

(1) Determination of whether limit exceeded for 1997The numerical limitation for 1997 is exceeded if, based on the reports required under paragraph (4), the number of Archer MSAs established as of—

(A)April 30, 1997, exceeds 375,000, or

(B)June 30, 1997, exceeds 525,000.

(2) Determination of whether limit exceeded for 1998, 1999, 2001, 2002, 2004, 2005, or 2006

(A) In generalThe numerical limitation for 1998, 1999, 2001, 2002, 2004, 2005, or 2006 is exceeded if the sum of—

(i) the number of MSA returns filed on or before April 15 of such calendar year for taxable years ending with or within the preceding calendar year, plus

(ii) the Secretary’s estimate (determined on the basis of the returns described in clause (i)) of the number of MSA returns for such taxable years which will be filed after such date,

exceeds 750,000 (600,000 in the case of 1998). For purposes of the preceding sentence, the term “MSA return” means any return on which any exclusion is claimed under section 106(b) or any deduction is claimed under this section.

(B) Alternative computation of limitationThe numerical limitation for 1998, 1999, 2001, 2002, 2004, 2005, or 2006 is also exceeded if the sum of—

(i) 90 percent of the sum determined under subparagraph (A) for such calendar year, plus

(ii) the product of 2.5 and the number of Archer MSAs established during the portion of such year preceding July 1 (based on the reports required under paragraph (4)) for taxable years beginning in such year,

exceeds 750,000.

(3) Previously uninsured individuals not included in determination

(A) In general

(B) Previously uninsured individual

(4) Reporting by MSA trustees

(A) In generalNot later than August 1 of 1997, 1998, 1999, 2001, 2002, 2004, 2005, and 2006, each person who is the trustee of an Archer MSA established before July 1 of such calendar year shall make a report to the Secretary (in such form and manner as the Secretary shall specify) which specifies—

(i) the number of Archer MSAs established before such July 1 (for taxable years beginning in such calendar year) of which such person is the trustee,

(ii) the name and TIN of the account holder of each such account, and

(iii) the number of such accounts which are accounts of previously uninsured individuals.

(B) Additional report for 1997

(C) Penalty for failure to file reportThe penalty provided in section 6693(a) shall apply to any report required by this paragraph, except that—

(i) such section shall be applied by substituting “$25” for “$50”, and

(ii) the maximum penalty imposed on any trustee shall not exceed $5,000.

(D) Aggregation of accounts

(5) Date of making determinations

(Added Pub. L. 104–191, title III, § 301(a), Aug. 21, 1996, 110 Stat. 2037; amended Pub. L. 105–33, title IV, § 4006(b)(2), Aug. 5, 1997, 111 Stat. 333; Pub. L. 105–34, title XVI, § 1602(a)(2), (3), Aug. 5, 1997, 111 Stat. 1093, 1094; Pub. L. 106–554, § 1(a)(7) [title II, §§ 201(a), (b), 202(a)(4), (b)(2)(B), (3)–(8), (10), (11)], Dec. 21, 2000, 114 Stat. 2763, 2763A–628, 2763A–629; Pub. L. 107–147, title VI, § 612(a), (b), Mar. 9, 2002, 116 Stat. 61; Pub. L. 108–173, title XII, § 1201(c), Dec. 8, 2003, 117 Stat. 2476; Pub. L. 108–311, title II, § 207(19), title III, § 322(a), (b), Oct. 4, 2004, 118 Stat. 1178, 1183; Pub. L. 109–432, div. A, title I, § 117(a), (b), Dec. 20, 2006, 120 Stat. 2941; Pub. L. 111–148, title IX, §§ 9003(b), 9004(b), Mar. 23, 2010, 124 Stat. 854; Pub. L. 115–97, title I, §§ 11002(d)(1)(T), 11051(b)(3)(D), Dec. 22, 2017, 131 Stat. 2060, 2090; Pub. L. 116–136, div. A, title III, § 3702(b), Mar. 27, 2020, 134 Stat. 416.)

§ 221. Interest on education loans

(a) Allowance of deduction

(b) Maximum deduction

(1) In general

(2) Limitation based on modified adjusted gross income

(A) In general

(B) Amount of reductionThe amount determined under this subparagraph is the amount which bears the same ratio to the amount which would be so taken into account as—

(i) the excess of—(I) the taxpayer’s modified adjusted gross income for such taxable year, over(II) $50,000 ($100,000 in the case of a joint return), bears to

(ii) $15,000 ($30,000 in the case of a joint return).

(i) without regard to this section and sections 85(c) 1

1 So in original. Probably should be followed by a comma.

911, 931, and 933, and

(ii) after application of sections 86, 135, 137, 219, and 469.

(d) DefinitionsFor purposes of this section—

(1) Qualified education loanThe term “qualified education loan” means any indebtedness incurred by the taxpayer solely to pay qualified higher education expenses—

(A) which are incurred on behalf of the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer as of the time the indebtedness was incurred,

(B) which are paid or incurred within a reasonable period of time before or after the indebtedness is incurred, and

Such term includes indebtedness used to refinance indebtedness which qualifies as a qualified education loan. The term “qualified education loan” shall not include any indebtedness owed to a person who is related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer or to any person by reason of a loan under any qualified employer plan (as defined in section 72(p)(4)) or under any contract referred to in section 72(p)(5).

(2) Qualified higher education expensesThe term “qualified higher education expenses” means the cost of attendance (as defined in section 472 of the Higher Education Act of 1965, 20 U.S.C. 1087ll, as in effect on the day before the date of the enactment of the Taxpayer Relief Act of 1997) at an eligible educational institution, reduced by the sum of—

(A) the amount excluded from gross income under section 127, 135, 529, or 530 by reason of such expenses, and

(B) the amount of any scholarship, allowance, or payment described in section 25A(g)(2).

For purposes of the preceding sentence, the term “eligible educational institution” has the same meaning given such term by section 25A(f)(2), except that such term shall also include an institution conducting an internship or residency program leading to a degree or certificate awarded by an institution of higher education, a hospital, or a health care facility which offers postgraduate training.

(3) Eligible student

(4) Dependent

(e) Special rules

(1) Denial of double benefit

(2) Married couples must file joint return

(3) Marital status

(f) Inflation adjustments

(1) In generalIn the case of a taxable year beginning after 2002, the $50,000 and $100,000 amounts in subsection (b)(2) shall each be increased by an amount equal to—

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2001” for “calendar year 2016” in subparagraph (A)(ii) thereof.

(2) Rounding

(Added Pub. L. 105–34, title II, § 202(a), Aug. 5, 1997, 111 Stat. 806; amended Pub. L. 105–206, title VI, § 6004(b), July 22, 1998, 112 Stat. 792; Pub. L. 105–277, div. J, title IV, § 4003(a)(2)(A), (3), Oct. 21, 1998, 112 Stat. 2681–908; Pub. L. 107–16, title IV, §§ 402(b)(2)(B), 412(a)(1), (b)(1), (2), 431(c)(2), June 7, 2001, 115 Stat. 62–64, 68; Pub. L. 108–311, title II, § 207(20), title IV, § 408(b)(5), Oct. 4, 2004, 118 Stat. 1178, 1192; Pub. L. 108–357, title I, § 102(d)(2), Oct. 22, 2004, 118 Stat. 1428; Pub. L. 109–135, title IV, § 412(t), Dec. 21, 2005, 119 Stat. 2638; Pub. L. 113–295, div. A, title II, § 221(a)(40), Dec. 19, 2014, 128 Stat. 4043; Pub. L. 115–97, title I, §§ 11002(d)(1)(U), 13305(b)(1), Dec. 22, 2017, 131 Stat. 2060, 2126; Pub. L. 116–94, div. O, title III, § 302(b)(2), Dec. 20, 2019, 133 Stat. 3176; Pub. L. 116–136, div. A, title II, § 2206(b), Mar. 27, 2020, 134 Stat. 347; Pub. L. 116–260, div. EE, title I, § 104(b)(2)(G), Dec. 27, 2020, 134 Stat. 3041; Pub. L. 117–2, title IX, § 9042(b)(6), Mar. 11, 2021, 135 Stat. 122.)

[§ 222. Repealed. Pub. L. 116–260, div. EE, title I, § 104(b)(1), Dec. 27, 2020, 134 Stat. 3041]

§ 223. Health savings accounts

(a) Deduction allowed

(b) Limitations

(1) In general

(2) Monthly limitationThe monthly limitation for any month is 1⁄12 of—

(A) in the case of an eligible individual who has self-only coverage under a high deductible health plan as of the first day of such month, $2,250.

(B) in the case of an eligible individual who has family coverage under a high deductible health plan as of the first day of such month, $4,500.

(3) Additional contributions for individuals 55 or older

(A) In general

(B) Additional contribution amount

(4) Coordination with other contributionsThe limitation which would (but for this paragraph) apply under this subsection to an individual for any taxable year shall be reduced (but not below zero) by the sum of—

(A) the aggregate amount paid for such taxable year to Archer MSAs of such individual,

(B) the aggregate amount contributed to health savings accounts of such individual which is excludable from the taxpayer’s gross income for such taxable year under section 106(d) (and such amount shall not be allowed as a deduction under subsection (a)), and

(C) the aggregate amount contributed to health savings accounts of such individual for such taxable year under section 408(d)(9) (and such amount shall not be allowed as a deduction under subsection (a)).

Subparagraph (A) shall not apply with respect to any individual to whom paragraph (5) applies.

(5) Special rule for married individualsIn the case of individuals who are married to each other, if either spouse has family coverage—

(B) the limitation under paragraph (1) (after the application of subparagraph (A) and without regard to any additional contribution amount under paragraph (3))—

(i) shall be reduced by the aggregate amount paid to Archer MSAs of such spouses for the taxable year, and

(ii) after such reduction, shall be divided equally between them unless they agree on a different division.

(6) Denial of deduction to dependents

(7) Medicare eligible individuals

(8) Increase in limit for individuals becoming eligible individuals after the beginning of the year

(A) In generalFor purposes of computing the limitation under paragraph (1) for any taxable year, an individual who is an eligible individual during the last month of such taxable year shall be treated—

(i) as having been an eligible individual during each of the months in such taxable year, and

(ii) as having been enrolled, during each of the months such individual is treated as an eligible individual solely by reason of clause (i), in the same high deductible health plan in which the individual was enrolled for the last month of such taxable year.

(B) Failure to maintain high deductible health plan coverage

(i) In generalIf, at any time during the testing period, the individual is not an eligible individual, then—(I) gross income of the individual for the taxable year in which occurs the first month in the testing period for which such individual is not an eligible individual is increased by the aggregate amount of all contributions to the health savings account of the individual which could not have been made but for subparagraph (A), and(II) the tax imposed by this chapter for any taxable year on the individual shall be increased by 10 percent of the amount of such increase.

(ii) Exception for disability or death

(iii) Testing period

(1) Eligible individual

(A) In generalThe term “eligible individual” means, with respect to any month, any individual if—

(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and

(B) Certain coverage disregardedSubparagraph (A)(ii) shall be applied without regard to—

(i) coverage for any benefit provided by permitted insurance,

(ii) coverage (whether through insurance or otherwise) for accidents, disability, dental care, vision care, long-term care, or (in the case of months or plan years to which paragraph (2)(E) applies) telehealth and other remote care, and

(iii) for taxable years beginning after December 31, 2006, coverage under a health flexible spending arrangement during any period immediately following the end of a plan year of such arrangement during which unused benefits or contributions remaining at the end of such plan year may be paid or reimbursed to plan participants for qualified benefit expenses incurred during such period if—(I) the balance in such arrangement at the end of such plan year is zero, or(II) the individual is making a qualified HSA distribution (as defined in section 106(e)) in an amount equal to the remaining balance in such arrangement as of the end of such plan year, in accordance with rules prescribed by the Secretary.

(D) Special rule for individuals receiving benefits subject to surprise billing statutes

(2) High deductible health plan

(A) In generalThe term “high deductible health plan” means a health plan—

(i) which has an annual deductible which is not less than—(I) $1,000 for self-only coverage, and(II) twice the dollar amount in subclause (I) for family coverage, and

(ii) the sum of the annual deductible and the other annual out-of-pocket expenses required to be paid under the plan (other than for premiums) for covered benefits does not exceed—(I) $5,000 for self-only coverage, and(II) twice the dollar amount in subclause (I) for family coverage.

(B) Exclusion of certain plans

(D) Special rules for network plansIn the case of a plan using a network of providers—

(i) Annual out-of-pocket limitation

(ii) Annual deductible

(E) Safe harbor for absence of deductible for telehealthIn the case of—

(i) months beginning after March 31, 2022, and before January 1, 2023, and

(ii) plan years beginning on or before December 31, 2021, or after December 31, 2022, and before January 1, 2025,

a plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for telehealth and other remote care services.

(F) Special rule for surprise billing

(G) Safe harbor for absence of deductible for certain insulin products

(i) In general

(ii) Selected insulin productsFor purposes of this subparagraph—(I) In general(II) Insulin

(3) Permitted insuranceThe term “permitted insurance” means—

(A) insurance if substantially all of the coverage provided under such insurance relates to—

(i) liabilities incurred under workers’ compensation laws,

(ii) tort liabilities,

(iii) liabilities relating to ownership or use of property, or

(iv) such other similar liabilities as the Secretary may specify by regulations,

(B) insurance for a specified disease or illness, and

(4) Family coverage

(5) Archer MSA

(d) Health savings accountFor purposes of this section—

(1) In generalThe term “health savings account” means a trust created or organized in the United States as a health savings account exclusively for the purpose of paying the qualified medical expenses of the account beneficiary, but only if the written governing instrument creating the trust meets the following requirements:

(A) Except in the case of a rollover contribution described in subsection (f)(5) or section 220(f)(5), no contribution will be accepted—

(i) unless it is in cash, or

(ii) to the extent such contribution, when added to previous contributions to the trust for the calendar year, exceeds the sum of—(I) the dollar amount in effect under subsection (b)(2)(B), and(II) the dollar amount in effect under subsection (b)(3)(B).

(D) The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund.

(E) The interest of an individual in the balance in his account is nonforfeitable.

(2) Qualified medical expenses

(A) In general

(B) Health insurance may not be purchased from account

(i) a health plan during any period of continuation coverage required under any Federal law,

(ii) a qualified long-term care insurance contract (as defined in section 7702B(b)),

(iii) a health plan during a period in which the individual is receiving unemployment compensation under any Federal or State law, or

(iv) in the case of an account beneficiary who has attained the age specified in section 1811 of the Social Security Act, any health insurance other than a medicare supplemental policy (as defined in section 1882 of the Social Security Act).

(D) Menstrual care product

(3) Account beneficiary

(4) Certain rules to applyRules similar to the following rules shall apply for purposes of this section:

(A) Section 219(d)(2) (relating to no deduction for rollovers).

(B) Section 219(f)(3) (relating to time when contributions deemed made).

(D) Section 408(g) (relating to community property laws).

(E) Section 408(h) (relating to custodial accounts).

(e) Tax treatment of accounts

(1) In general

(2) Account terminations

(f) Tax treatment of distributions

(1) Amounts used for qualified medical expenses

(2) Inclusion of amounts not used for qualified medical expenses

(3) Excess contributions returned before due date of return

(A) In generalIf any excess contribution is contributed for a taxable year to any health savings account of an individual, paragraph (2) shall not apply to distributions from the health savings accounts of such individual (to the extent such distributions do not exceed the aggregate excess contributions to all such accounts of such individual for such year) if—

(i) such distribution is received by the individual on or before the last day prescribed by law (including extensions of time) for filing such individual’s return for such taxable year, and

(ii) such distribution is accompanied by the amount of net income attributable to such excess contribution.

Any net income described in clause (ii) shall be included in the gross income of the individual for the taxable year in which it is received.

(B) Excess contribution

(4) Additional tax on distributions not used for qualified medical expenses

(A) In general

(B) Exception for disability or death

(5) Rollover contributionAn amount is described in this paragraph as a rollover contribution if it meets the requirements of subparagraphs (A) and (B).

(A) In general

(B) Limitation

(6) Coordination with medical expense deduction

(7) Transfer of account incident to divorce

(8) Treatment after death of account beneficiary

(A) Treatment if designated beneficiary is spouse

(B) Other cases

(i) In generalIf, by reason of the death of the account beneficiary, any person acquires the account beneficiary’s interest in a health savings account in a case to which subparagraph (A) does not apply—(I) such account shall cease to be a health savings account as of the date of death, and(II) an amount equal to the fair market value of the assets in such account on such date shall be includible if such person is not the estate of such beneficiary, in such person’s gross income for the taxable year which includes such date, or if such person is the estate of such beneficiary, in such beneficiary’s gross income for the last taxable year of such beneficiary.

(ii) Special rules(I) Reduction of inclusion for predeath expenses(II) Deduction for estate taxes

(g) Cost-of-living adjustment

(1) In generalEach dollar amount in subsections (b)(2) and (c)(2)(A) shall be increased by an amount equal to—

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins determined by substituting for “calendar year 2016” in subparagraph (A)(ii) thereof—

(i) except as provided in clause (ii), “calendar year 1997”, and

(ii) in the case of each dollar amount in subsection (c)(2)(A), “calendar year 2003”.

In the case of adjustments made for any taxable year beginning after 2007, section 1(f)(4) shall be applied for purposes of this paragraph by substituting “March 31” for “August 31”, and the Secretary shall publish the adjusted amounts under subsections (b)(2) and (c)(2)(A) for taxable years beginning in any calendar year no later than June 1 of the preceding calendar year.

(2) Rounding

(h) ReportsThe Secretary may require—

(1) the trustee of a health savings account to make such reports regarding such account to the Secretary and to the account beneficiary with respect to contributions, distributions, the return of excess contributions, and such other matters as the Secretary determines appropriate, and

(2) any person who provides an individual with a high deductible health plan to make such reports to the Secretary and to the account beneficiary with respect to such plan as the Secretary determines appropriate.

The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required by the Secretary.

(Added Pub. L. 108–173, title XII, § 1201(a), Dec. 8, 2003, 117 Stat. 2469; amended Pub. L. 109–135, title IV, § 404(c), Dec. 21, 2005, 119 Stat. 2634; Pub. L. 109–432, div. A, title III, §§ 302(b), 303(a), (b), 304, 305(a), 307(b), Dec. 20, 2006, 120 Stat. 2949, 2950, 2953; Pub. L. 111–148, title IX, §§ 9003(a), 9004(a), Mar. 23, 2010, 124 Stat. 854; Pub. L. 114–41, title IV, § 4007(b)(1), July 31, 2015, 129 Stat. 466; Pub. L. 115–97, title I, §§ 11002(d)(1)(V), 11051(b)(3)(E), Dec. 22, 2017, 131 Stat. 2060, 2090; Pub. L. 115–141, div. U, title IV, § 401(a)(57), (58), Mar. 23, 2018, 132 Stat. 1186, 1187; Pub. L. 116–136, div. A, title III, §§ 3701(a), (b), 3702(a), Mar. 27, 2020, 134 Stat. 415, 416; Pub. L. 116–260, div. BB, title I, § 102(c)(4)(A), Dec. 27, 2020, 134 Stat. 2796; Pub. L. 117–103, div. P, title II, § 307(a), (b), Mar. 15, 2022, 136 Stat. 807; Pub. L. 117–169, title I, § 11408(a), Aug. 16, 2022, 136 Stat. 1905; Pub. L. 117–328, div. FF, title IV, § 4151(a), (b), Dec. 29, 2022, 136 Stat. 5931.)

§ 224. Cross reference

For deductions in respect of a decedent, see section 691.

(Aug. 16, 1954, ch. 736, 68A Stat. 72, § 217; renumbered § 218, Pub. L. 88–272, title II, § 213(a)(1), Feb. 26, 1964, 78 Stat. 50; renumbered § 219, Pub. L. 92–178, title VII, § 702(a), Dec. 10, 1971, 85 Stat. 561; renumbered § 220, Pub. L. 93–406, title II, § 2002(a)(1), Sept. 2, 1974, 88 Stat. 958; renumbered § 221, Pub. L. 94–455, title XV, § 1501(a), Oct. 4, 1976, 90 Stat. 1734; renumbered § 222, renumbered § 223, Pub. L. 97–34, title I, §§ 103(a), 125(a), Aug. 13, 1981, 95 Stat. 187, 201; renumbered § 220 and amended Pub. L. 99–514, title I, § 135(b)(1), title III, § 301(b)(5)(A), Oct. 22, 1986, 100 Stat. 2116, 2217; renumbered § 221, Pub. L. 100–647, title VI, § 6007(a), Nov. 10, 1988, 102 Stat. 3687; renumbered § 220, Pub. L. 101–508, title XI, § 11802(e)(2), Nov. 5, 1990, 104 Stat. 1388–530; renumbered § 221, Pub. L. 104–191, title III, § 301(a), Aug. 21, 1996, 110 Stat. 2037; renumbered § 222, Pub. L. 105–34, title II, § 202(a), Aug. 5, 1997, 111 Stat. 806; renumbered § 223, Pub. L. 107–16, title IV, § 431(a), June 7, 2001, 115 Stat. 66; renumbered § 224, Pub. L. 108–173, title XII, § 1201(a), Dec. 8, 2003, 117 Stat. 2469.)