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TITLE 26-INTERNAL REVENUE CODE § 105. Amounts received under accident and health plans (a) Amounts attributable to employer contributions Except as otherwise provided in this section, amounts received by an employee through acci- dent or health insurance for personal injuries or sickness shall be included in gross income to the extent such amounts (1) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (2) are paid by the employer. (b) Amounts expended for medical care Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include amounts referred to in subsection (a) if such amounts are paid, directly or indi- rectly, to the taxpayer to reimburse the taxpay- er for expenses incurred by him for the medical care (as defined in section 213(e)) of the tax- payer, his spouse, and his dependents (as de- fined in section 152). (c) Payments unrelated to absence from work Gross income does not include amounts re- ferred to in subsection (a) to the extent such amounts- (1) constitute payment for the permanent loss or loss of use of a member or function of the body, or the permanent disfigurement, of the taxpayer, his spouse, or a dependent (as defined in section 152), and (2) are computed with reference to the nature of the injury without regard to the period the employee is absent from work. (d) Certain disability payments (1) In general In the case of a taxpayer who- (A) has not attained age 65 before the close of the taxable year, and (B) retired on disability and, when he re- tired, was permanently and totally disabled, gross income does not include amounts re- ferred to in subsection (a) if such amounts constitute wages or payments in lieu of wages for a period during which the employee is absent from work on account of permanent and total disability. (2) Limitation This subsection shall not apply to the extent that the amounts referred to in para- graph (1) exceed a weekly rate of $100. (3) Phaseout over $15,000 If the adjusted gross income of the taxpay- er for the taxable year (determined without regard to this subsection) exceeds $15,000, the amount which but for this paragraph would be excluded under this subsection for the tax- able year shall be reduced by an amount equal to the excess of the adjusted gross income (as so determined) over $15,000. (4) Married couple must file joint return Except in the case of a husband and wife who live apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, the exclusion provided by this subsection shall be allowed only if the taxpayer and his spouse file a Joint return for the taxable year. For purposes of this subsec- tion, marital status shall be determined under section 143. (5) Permanent and total disability defined For purposes of this subsection, an individ- ual is permanently and totally disabled if he is unable to engage in any substantial gainful activity by reason of any medically determin- able physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Secretary may require. (6) Joint return For purposes of this subsection, the term "joint return" Means the joint return of a husband and wife made under section 6013. (7) Coordination with section 72 In the case of an individual described in subparagraphs (A) and (B) of paragraph (1), for purposes of section 72 the annuity start- ing date shall not be deemed to occur before the beginning of the taxable year in which the taxpayer attains age 65, or before the be- ginning of an earlier taxable year for which the taxpayer makes an irrevocable election not to seek the benefits of this subsection for such year and all subsequent years. (e) Accident and health plans For purposes of this section and section 104- (1) amounts received under an accident or health plan for employees, and (2) amounts received from a sickness and disability fund for employees maintained under the law of a State or the District of Co- lumbia, shall be treated as amounts received through accident or health insurance. (f) Rules for application of section 213 For purposes of section 213(a) (relating to medical, dental, etc., expenses) amounts ex- cluded from gross income under subsection (c) or (d) shall not be considered as compensation (by insurance or otherwise) for expenses paid for medical care. (g) Self-employed individual not considered an em. ployee For purposes of this section, the term "em- ployee" does not include an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals). (Aug. 16, 1954, ch. 736, 68A Stat. 30; Oct. 10, 1962, Pub. L. 87-792, § 7(e), 78 Stat. 829; Feb. 26, 1964, Pub. L. 88-272, title II, § 205(a), 78 Stat. 38; Oct. 4, 1976, Pub. L. 94-455, title V, § 505(a), title XIX, § 1901(c)(2), 90 Stat. 1566, 1803.) AMENDMENTS 1076-Subsec. (d). Pub. L. 94-455, § 505(a), substitut- ed provisions relating to an exclusion of up to $5,200 a year for taxpayers retiring on disability prior to age 65: dollar-for-dollar phase out of exclusion for adjust. ed annual gross income (including disability income) in excess of $15,000: requirement that married couple must file joint return; defined "permanent and total disability" and "Joint return"; and added special rule Page 118 § 105