HR 1127 IH

To amend the Internal Revenue Code of 1986 to allow a deduction for amounts paid for health insurance and prescription drug costs of individuals.

March 20, 2001

Mr. STEARNS introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to allow a deduction for amounts paid for health insurance and prescription drug costs of individuals.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Health Care Tax Deduction Act of 2001'.

SEC. 2. DEDUCTION FOR HEALTH INSURANCE AND PRESCRIPTION DRUG COSTS OF INDIVIDUALS.

(a) IN GENERAL- Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 222 as section 223 and by inserting after section 221 the following new section:

`SEC. 222. HEALTH INSURANCE AND PRESCRIPTION DRUG COSTS.

`(a) IN GENERAL- In the case of an individual, there shall be allowed as a deduction an amount equal to the sum of the amount paid during the taxable year for--

`(1) insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents, plus

`(2) unreimbursed prescription drug expenses paid by the taxpayer for the taxpayer and the taxpayer's spouse and dependents.

`(b) LIMITATIONS AND SPECIAL RULES-

`(1) EMPLOYER CONTRIBUTIONS TO CAFETERIA PLANS, FLEXIBLE SPENDING ARRANGEMENTS, AND MEDICAL SAVINGS ACCOUNTS- Employer contributions to a cafeteria plan, a flexible spending or similar arrangement, or a medical savings account which are excluded from gross income under section 106 shall be treated for purposes of subsection (a) as paid by the employer.

`(2) DEDUCTION NOT AVAILABLE FOR PAYMENT OF ANCILLARY COVERAGE PREMIUMS- Any amount paid as a premium for insurance which provides for--

`(A) coverage for accidents, disability, dental care, vision care, or a specified illness, or

`(B) making payments of a fixed amount per day (or other period) by reason of being hospitalized,

shall not be taken into account under subsection (a).

`(3) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE AND PRESCRIPTION DRUG COSTS OF SELF-EMPLOYED INDIVIDUALS- The amount taken into account by the taxpayer in computing the deduction under section 162(l) shall not be taken into account under this section.

`(4) COORDINATION WITH MEDICAL EXPENSE DEDUCTION- The amount taken into account by the taxpayer in computing the deduction under this section shall not be taken into account under section 213.

`(c) DEFINITIONS- For purposes of this section--

`(1) MEDICAL CARE-

`(A) IN GENERAL- The term `medical care' has the meaning given such term by section 213(d) without regard to--

`(i) paragraph (1)(C) thereof, and

`(ii) so much of paragraph (1)(D) thereof as relates to qualified long-term care insurance contracts.

`(B) EXCLUSION OF CERTAIN OTHER CONTRACTS- The term `medical care' shall not include insurance if a substantial portion of its benefits are excepted benefits (as defined in section 9832(c)).

`(2) UNREIMBURSED PRESCRIPTION DRUG EXPENSES- The term `unreimbursed prescription drug expenses' means amounts paid or incurred for a prescribed drug (as defined by section 213(d)(3)) the cost of which to the taxpayer is not reimbursed by insurance or otherwise.

`(d) REGULATIONS- The Secretary shall prescribe such regulations as may be appropriate to carry out this section.'.

(b) DEDUCTION ALLOWED WHETHER OR NOT TAXPAYER ITEMIZES OTHER DEDUCTIONS- Subsection (a) of section 62 of such Code is amended by inserting after paragraph (17) the following new item:

`(18) HEALTH INSURANCE AND PRESCRIPTION DRUG COSTS- The deduction allowed by section 222.'.

(c) CLERICAL AMENDMENTS- The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items:

`Sec. 222. Health insurance and prescription drug costs.

`Sec. 223. Cross reference.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

SEC. 3. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE AND PRESCRIPTION DRUG COSTS OF SELF-EMPLOYED INDIVIDUALS.

(a) IN GENERAL- Paragraph (1) of section 162(l) of the Internal Revenue Code of 1986 (relating to general rule for allowance of deduction for health insurance costs of self-employed individuals) is amended to read as follows:

`(1) ALLOWANCE OF DEDUCTION- In the case of an individual who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to the sum of--

`(A) 100 percent of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents, plus

`(B) unreimbursed prescription drug expenses (within the meaning of section 222(c)(2)) paid during the taxable year by the taxpayer for the taxpayer and the taxpayer's spouse and dependents.'.

(b) CLARIFICATION OF LIMITATIONS ON OTHER COVERAGE- The first sentence of section 162(l)(2)(B) of such Code is amended to read as follows: `Paragraph (1) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any subsidized health plan maintained by any employer (other than an employer described in section 401(c)(4)) of the taxpayer or the spouse of the taxpayer.'.

(c) CLERICAL AMENDMENT- The heading for section 162(l) of such Code is amended by inserting `AND PRESCRIPTION DRUG' after `INSURANCE'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

END