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2439 N4edical
expensedeductionfor specialeducationcosts
Client Letters
.il2439 Medical expense deduction for special education costs
To the practitioner:
The subjectis discussedin FederalTax Coordinatorfl K-2150UnitedStatesTax Reporterll 2134.10.
DearClient:
You haveaskedme whetheryou may deductthe specialeducationcostsyou are incurringon behalfof
yourchildas medicalexpenses.
Expensesthat you incur in orderto enableyour childto compensatefor or overcomedisabilitiesor to
prepareyour childfor future normaleducationor normallivingare deductiblemedicalexpenses.Thus,
any expensesfor therapythat helpsyour child'sadaptationare deductiblemedicalexpenses.In
addition,the expenses
of your child'sschooling
at a "specialschool"for mentallyor physically
disabled
individualsare deductible(includingthe cost of an ordinaryeducation)if the resourcesof the school
are the reasonfor your child'spresenceand the educationalservicesprovidedare renderedonly as an
incidentto the medicalcare provided.
The qualification
curriculum.
Thus,a school
of a schoolas a specialschooldependson the school's
qualifiesas a specialschoolonly if the primaryfocusof its currlculumis to enablestudentsto
compensatefor or overcomedisabilities,and to preparethem for future normaleducationor normal
living.For instance,schoolsthat providesspecialservicesfor childrenwith mentaland/or physical
disabilities,suchas schoolsfor the teachingof brailleor lip readingare specialschoolsbecausethe
primarypurposeof the schoolsis alleviating
or treatinga physicalhandicap.
Similarly,
schoolswith
specialprogramsfor treatingseverelearning.mental,psychological
or emotionaldisordersor dyslexia
are soeciaI schools.
In contrast,a schoolthat doesnot providea specialprogram/but is beneficialbecauseof its small
classsizeor becauseit providesaddedserviceswithin a normaiacademicsetting,is not a special
school,sincethe primarypurposeof the schoolis academic.However,if an ordinaryschoolis willingto
developa specialprogramthat meetsyour child'sneeds,the schoolwill qualifyas a specialschool,
of whethera schoolis a specialschoolis madeon the basisof your child's
sincethe determination
not the curriculum
of the schoolas a whole.
curriculum,
Of course,you cannotdeductany specialeducationexpensesto the extent the expensesare borneby
the state or localitv.In addition,the medicalexpensedeductionis limitedto the amountthat exceeds
7.5o/oof your adjustedgrossincome.
If you have any questionsregardingyour abilityto deductyour specialeducationcostsor any other
expensesthat you incuron behalfof your child,pleasefeel free to give me a call.
Very truly yours,
ENDOFDOCUN4ENT
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ChapterK Deductions:Taxes,Interest,Charitable,Medical,Others
That Qualifyas MedicalExpenses-OtherThanTraveland Transportation
K-2100Expenditures
Exoenses.
institutions-when
K-2150Educational
full tuitioncostis deductible.
Federal Tax Coordinator 2d
flK-2150. Educational institutions-when
deductible.
full tuition cost is
lYedicalcare deductionsfor paymentsto educationalinstitutionsare subjectto the institutionrulesof
a1
tl K-2143. In additionto meetingthose rules,for all of the costsof attendinga schoolto be
deductible,the schoolmust be a specialschool( ll K-2153) for a mentallyor physicallyhandicapped
individual( fl K-2151). Also,that person'sconditionmust be suchthat the resourcesof the institution
for alleviatingsuch mentalor physicalhandicapare a principalreasonfor his presencethere ( 1l K2152). In sucha case,the costof attendingsucha specialschoolwill includethe costof mealsand
lodging,if supplied,and the cost of ordinaryeducationfurnishedby the schoolif that educationis
incidentalto the specialservicesfurnishedby the school(see tl K-2154), eventhoughordinary
is not medicalcare.a2
education
f/ *to observation: Thus,for the full tuition payableto an educationalinstitutionto be
deductible,taxpayersmust meet a tougherstandardthan they need meet to deductthe
full fee payableto other non- hospitalinstitutions.
i/ sa-ple €lient letter: Sampleclientletterson the medicalexpensedeductionfor
specialeducationcostsappearin ClientLettersfl 2439 .
47
RevRul70-285,1970-1CB 52 ; R e v R u l 5 8 - 2 8 0 . 1 9 5 8 - 1 C B 1 5 7 .
42
R e gI 1 . 2 1 3 - l ( e x l x v x a.)
Forthe deductibility
coststhat don'tmeetthe abovetests,seefl K-2155et seq.
of education
.T
E N DO F D O C U I V I E N
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ChapterK Deductions:Taxes/Interest,Charitable,Medical,Others
That Qualifyas lvledical
K-2100Expenditures
Expenses-OtherThanTraveland Transpotation
ExDenses.
seriousenoughunderthe medicalexpensededuction
special
K-2151Whenis a condition
schoolrules.
Federal Tax Coordinator 2d
tlK-2151. When is a condition serious enough under the medical
expense deduction special school rules.
In the following cases, the condition involved was serious enough to qualify under the rules for the
deductibility, as a medical expense, of the costs of special schools, discussedat !l K-2150
... a neurological
disorder,consisting
of impairmentin the areasof visualmemoryand visual
in
a
severe
learning
with respectto reading.aa
matching,and resulting
disability
suchas (a) thoseresultingfromthe divorceof a child'sparentsand the
... emotionalproblems,
suicideof her father, manifestingthemselvesin a refusaito do schoolwork,tempertantrumsand
abuseas a resultof
vomiting,4s(b) a child'slow selfesteem,maladjustment
and psychological
ab and (c) an
with his mother,resultingin a learningdysfunction,
his detrimental
relationship
"adjustmentreactionof adolescence,
severe,with depressivefeatures."47
problemsas a resultof habitualdrug use.48
... severebehavioral
... dyslexiathat was sufficientlysevereto be a handicap.The dyslexiamust have beendiagnosed
by a physicianor other qualifiedprofessional
as a medicalconditionthat requiresspecial
l
education
to be corrected.48
44
Rev Rul 78-340, L978-2CB t24
45
creisdorf,Lawrence,(7970) 54 Tc 1684
Pazos,Jose,(1987)TC Memo1987-131, P H T C N 4f l 8 7 1 3 1 , 5 3 C C HT C M 3 3 7
47
IRS Letter Ruling 8447014
4B
Urbauer,Charles,(1992)TC Memo1992-170, RIATC Memo!192170
, 63 CCHlCM 2492
44.1
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ChapterK Deductions:Taxes,Interest,Charitable,Medical,Others
K-2100Expenditures
That Qualifyas MedicalExpenses-OtherThanTraveland Transportation
Expenses.
K-2152Whenare the specialschool'sresourcesthe principalreasonfor its use.
Federal Tax Coordinator 2d
flK-2152. When are the special school's resourcesthe principal
reason for its use.
In the followingcases,the patient'sconditionwas suchthat the resourcesof the institutionfor
alleviatinghis mentalor physicalhandicapswere a principalreasonfor his presencethere, underthe
rulesdiscussed
at fl K-2150:
... a mentallyretardedboy enrolledin a specially
curriculum
designed
to meetthe needsof
handicapped
childrenwhoseI.Q. scoresrangedbetween50 and 75. The programwas designed
to educatestudentswho were not ableto profit from the educationthat was beingoffered
throughordinaryclassroominstruction,but whoseintellectualabilityindicatedthe possibilityof a
degreeof scholasticattainmentwith the help of speciallytrainedteachersand specialmethods
49
and materials.
... a childwho did not cooperate
at all in schooland who was oftenphysically
sick,apparently
as
resultsof her parentsdivorcingand her father committingsuicide.Shetransferredto a school
to providetrainingto studentswith learningdisabilities,particularly
that was established
psychological
ones.She attendedthe schoolat the recommendation
of the psychiatristwho had
beengiving her therapy.Althoughit was difficultfor her motherfrom a financialstandpoint,she
enrolledthe child upon his recommendation
in the expectationthat the childwould be helpedto
overcomeher emotionaldifficultiesand resultantlearninghandicap.Whenprogresswas made in
this regard,the child was withdrawnfrom the schooland beganattendingpublicschool.s0
problemsas a resuitof habitualdrug useenrolledin a
with severebehavioral
... a 17-year-old
ratoryschooldesignedto addressboth the educationaland emotionalneedsof its
college-prepa
students.The schoolfacilitatedstudents'emotionaldevelopmentthrougha holisticprogramthat
includedcommunityinteraction,peersupportand weeklytherapysessions.The schoolalso used
a multifamilytherapyprogramcalled"Parent/ChjldCommunication
Groups"to treat students'
emotionalneeds.1
49
Rev Rul 70-285, 1970-1 CB 52 .
50
Greisdort Lawrence,(1970) 54 TC 1684 .
1
Urbauer,Charles,(1992)TC Memo1992-L7O,RIATC f4emofl92170, 63 CCHTCM2492
ENDOFDOCUMENT
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ChapterK Deductions:Taxes,Interest,Charitable,Medical,Others
That Qualifyas MedicalExpenses-OtherThanTraveland Transportation
K-2100Expenditures
Expenses.
K-2153What is a specialschoolfor purposesof the medicalexpensededuction.
Federal Tax Coordinator 2d
flK-2153. What is a special school for purposes of the medical
expense deduction.
The distinguishing
characteristic
of a specialschool,for purposesof the rulesat 1l K-2150, is the
substantivecontentof its curriculum.The curriculumof a specialschoolmay includesomeordinary
education,but this must be incidentalto the primarypurposeof the school,whichis to enablestudents
to compensatefor or overcomehandicaps,to preparethem for future normaleducationor normal
living.2
2
Reg5 1.213-1(e)(1)(v)(a)
; RevRul7O-2a5,7970-LCB 52 ; Pfeifer,DonaldR., (1978)TC l4emo
1978-189, PHTCMfl78189, 37 CCHTCM816 , affd(1979,CAr0) 79-2 USTCfl9518 .
The regsstatethat schoolsfor the teachingof brailleor lip readingare specialschoolsbecausethe
r Similarlya schoolwith a
primarypurposeof the schoolis alleviating
or treatinga physicalhandicap.
disorder4 or dyslexiaa 1 is
specialprogramfor treatingseverelearningdisordersdue to a neurological
a specialschool.And a schoolthat was specifically
establishedto assiststudentsin overcomingvarious
neurological
and that only acceptsstudentswith thoseconditions
is a specialschool.42
conditions
However,overcomingthe learningdisabilitiesmust be a principalreasonfor attendingthe school.Any
ordinaryeducationreceivedmust be incidentalto the specialeducationprovided.4 3
3
Reg5 1.213-1(e)(1XvXa)
4
Rev Rul 78-340, 1978-2 CB I24
4.7
IRS LetterRuling200521003; IRS Letter Ruling A4O|O24
4.2
IRS LetterRuling200704001
IRS LetterRuling200521003
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The regsalsostate that schoolsthat train the mentallyretardedare specialschoolsbecausethe
s Thus,a school
primarypurposeof the schoolis alleviating
or treatinga mentalor physicalhandicap.
providinga curriculumdesignedto meet the needsof handicapped
childrenwhoseI.Q. scoresranged
between50 and 75, in orderto educatestudentswho are not ableto profit from the educationthat was
beingofferedthroughordinaryclassroominstruction,but whoseintellectualability indicatethe
possibilityof a degreeof scholasticattainment,with the help of speciallytralnedteachersand special
methodsand materialsis a specialschoolbecausethe primarypurposeof the schoolis to alleviatea
6
mentalhandicap.
5
RegS 1.213-1(e)(1)(v)(a)
; RevRul7t-347, 797r-2CB rr4
6
RevRul70-285,f97O-I CB 52 .
Similarly,a schoolwhosestatedand actualpurposeis to providean environmentwhereaverageand
(usuallyemotionalor psychological)
above-average
studentswith speciallearningdisabilities
can learn
to adjustand functionnormallyin a competitiveclassroomsituationis a specialschoolwhere its
resourcesfor alleviatingthe child'sdisabilityare the principalreasonfor the child'spresencein the
schooland its educationalprogramis incidentalto its medicalfunction.7 Thus,a schoolwhichdoesn't
providecollegecoursesor livingfacilities,
but insteadprovides
tutoringand specialized
social,academic
and independent_living
skilldevelopment
to studentswith medically-related
learningdisabilities,
is a
cna.ial
c.h^^l
'
1
7
Greisdorf,LawrenceD., (1970) 54 TC 1684
IRS LetterRuling200729019.
Also,a psychiatrically
orientedboardingschooldesignedto meet the needsof studentswho havefailed
to make a satisfactoryadjustmentin their homes,schools,or socialrelationships
was a specialschool.
guidance
The school's
chiefemphasis
wason mentalhygieneand psychological
and it stressed
the
development
of soundgroupliving,recognizing
the needto dealwith eachchildon the basisof his
o
individual
Droblems.
B
IRS Letter Ruling 8447014 .
There is no requirement that a special school admit only students that are suffering from a mental or
physical diseaseor defect. The determination as to whether a school is a special school is made with
reference to the nature of the services received by the individual with respect to whom a deduction is
sought, not with reFerenceto the general nature of the institution as a whole. 9
I
Sims,AlvinJ., (1979) TC N4emo
1979-499, PHTCM1179499
,39 CCHTCM700 .
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Thus,the deductibilityof the tuition as a medicalexpensedependson what the schoolprovidesto an
individual,
and not on whetherthe schoolis a "specialschool."A schoolcan havea normaleducation
programfor most students,and a specialeducationprogramfor thosewho need it. In other words,a
schoolcan be "special"for one studentbut not for another.9 1 Thus,a specialcurriculumin a regular
school,that is a severablepart of the regularschool,can meet the RevRul 70-285 (footnote2)
definitionand thus be considereda specialschool.10Similarly,wherea directorof militaryscnool
and mentallyabnormaison as a personal
agreedto acceptthe taxpayer'sphysicallyhandicapped
instruction
in orderto alleviatethe child'sshortattentionspan,the
and providedone-on-one
challenge
school.1l
schoolwasa sDecial
9.1
IRS LetterRuling200521003
10
RevRul70-285,l97o-l CB 52
11
Olson,RollandT., (1964)TC lvlemot964-325, PHTCM.[t64325,23 CCHTCM2008 .
The courtshaverarelyconsidereda "regular"privateschoolto be a specialschool.Althoughthe
individualattention,smallclasssize,and strict discipli,ne
characteristic
of good privateschoolsoften
are beneficialto studentssufferingfrom mentalor physicaldefectsor illnesses,theseschoolsrarelyare
able to meet the tests of Rev Rul 7O-285(footnote2). 12Thus,wherea child is sent to a regular
privateschoolon a doctor'sadvicethat his speechproblemscouldbe alleviatedby beingwith normal
childrenat a regularschool,the schoolis not a specialschool,sinceno specialservicesare provided.13
wherea studentwas placedin a schoolwhoseapproach
wasto placespecialemphasis
on the
Similarly,
potential
yet
not
and
development
of
students
whose
had
been
reachedand whoseprogress
training
had beenimpededby weak study habitsor an inadequatescholasticbackground,the schoolwas not a
facilitiesand did not provide
specialschool.The schooldid not haveany psychiatricor psychological
ra
any counselingor therapyfor mentaland/or emotionalproblems.
Sims, Alvin J., (1979) TC l4emo L979-499 , PH TCM 1179499,39 CCHTCM 700 ; Reiff, Jack W., (1974)
T C M e m o L 9 7 4 - 2 O , P HT C M l t 7 4 0 2 1 , 3 3 C C HT C N 49 1 ; S h i d l e r ,D e v o r aR . , ( 1 9 7 1 ) T C M e m o 1 9 7 1 L26 , PH TCM T71126 , 30 CCH TCN4529 .
13
Weinberg,
IsraelJ., (1969)TC Memo1969-3, PHTCMfl69003, 28 CCHTCM10 .
14
P a z o s ,J o s e F . , ( 1 9 8 7 ) T C M e m o 1 9 8 7 - 1 3 1, P H T C M 1 8 7 1 3 1 , 5 3 C C HT C M 3 3 7 .
Where blind or deaf students or students with epilepsy go to private schools becausethe private
schools allow the students to attend school in a normal setting, the schools are not special schools
becausethe purpose of the schools is academic, rather than therapeutic. 1s
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ArnoldP.,(1968)51 TC 108; lvlartin,
JamesR., (1975)TC Memo1975-362,PH TCM
Grunwald,
(1977,
CCH
TCN4
1564
affd
CA6)
39
AFTR2d 77-692 , 54A F2d 633 ,77-r usTc 119180
,
;
1175362
,34
Shidler,DevoraR., (1971)TC Memo1971-126,PHTCMlt7Lt26 ,30 CCHTCM529 .
Wherea learningdisabledor emotionallydisturbedstudentattendeda privateschoolon a doctor's
recommendation
becauseof the school'ssmallclasses,the schoolwas not a specialschool.The school
had no psychologists
or psychiatristson staff, its administrationdid not holdthe schoolout to be a
'o
specialschool,and the schoolhad a normalcurriculum.
Pfeifer,DonaldR., (1978)TC Memo1978-189, PHTCMf78189 , 37 CCHTCM816 , affd (1979,CA10)
91 .
79-2 USTCfl9518; Reiff,JackW., (1974)TC lllemo1974-20,PHTclvll74O2O,33 CCHTCN4
The fact that a schoolprovidesspecialservicesfor studentswith disabilitiesdoesn'tnecessarymake
the schoola specialschool.Thus,a privateschool,approximately25oloof the studentsof which have
learningdisabilities,
and whichhad (a) a learningcenterto test thosestudentsand improvetheir
psychological
programwas not a specialschool.
counseling
learningskiilsand (b) an on-campus
Althoughthe studentspentsubstantialtime availinghimselfof thesespecialservices,he alsoengaged
in a full load of regularclassesand extracurrjcular
activities,so the regularclassesand extracurricular
161 Similarly,
not
incidental
to
wherea
were
the
alleviation
of
his
learningdisabilities.
activities
learningdisabledstudenttook remedialand academiccoursesat a privateschool,the schoolwas a not
a specialschool,sincethe primarypurposeof the schoolwas academic.162
16.1
Sims,AlvinJ., (L979)TC Memo1979-499, PHTclvl1179499
,39 CCHTclvl700
16.2
Walton,BruceS., (1982)TC Memo1982-648, PHTCMfl82648,45 CCHTCM65 .
In anothercase,the Tax Courtfoundthat the fact that the studentdroppedout of the schoolbecause
he couldn'tmeet its academicstandards,was an indicationthat the purposeof the schoolwas
academic,rather than the allevjationof the student'sdisability.The court statedthat it didn't believe
that a specialschooldesignedto treat studentswith learningdisabilitieswoulddrop a studentbecause
madehim incapable
his iearningdisabilities
of competingwith ordinarystudents.163
16.3
P f e i f e r ,D o n a l dR . , ( 1 9 7 8 ) T C M e m o t 9 7 8 - r 8 9 , P H T C M f l 7 8 1 8 9 , 3 7 C C HT C N 48 1 6 , a f f d ( 1 9 7 9 , C A 1 0 )
79-2 USTC!t9518 .
E N D O F D O C U M E N -T
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ChapterK Deductions:Taxes,Interest,Charitable,lYedical,Others
That Qualifyas MedicalExpenses-OtherThanTraveland Transportation
K-2100Expenditures
ExDenses.
K-2154Whetherexpenditureswere for ordinaryeducationincidentalto a school'sspecial
services.
Federal Tax Coordinator 2d
flK-2154. Whether expenditures were for ordinary education
incidental to a school's special services.
The cost of ordinaryeducationfurnishedby a specialschool( f K-2153) is a medicalexpenseif that
educationis incidentalto the specialservicesfurnishedby the school,see 1l K-2150.
A 17-year-oldwith severebehavioralproblemsas a resultof habitualdrug use enrolledin a school
designedto addressboth the educationaland emotionalneedsof its students.Tuitionat the schoolwas
deductible.The schoolrequiredhis parentsto maintaina "personalaccount"and "allowanceaccount"
failureto maintainthe accountswould have resultedin the son'sdismissalfrom the school.Becauseof
theseconditionsput on the two accounts.paymentsmade into them were ordinarycostsof education.
And they were incidentalto the specialservicesprovidedby the school.17
77
Urbauer,Charles,(1992)TC lvlemo1992-170, RIATC Memot192170, 63 CCHrCM 2492 .
ENDOF DOCUMENT
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Year2008Tax Benefitsfor Parentsof ChildrenWith LD - GreatSchools.net
Page1 of6
,ll
i.li€{-:l'SC6OOISlnvolvet parenis. S!.cesstli tiiJ5.
Year 2008Tax Benefitsfor Parentsof Children With LD
By Grade
Parentsof kidswith a severetear0ingdisabiLitymay be eligibtefor vatuabletax benefits.Readour annual
update.
l\
Nllrhrcl O (l{nii.
lvo'rloe Sedi! ,nd Ju6. P.lato
lf you havea chitd with a severelearningdisabitity(LD),you may quatifyfor valuabtetax benefits.lf your
chitd hasAD/HDor other physicat,mentator emotionalimpairments,you may atsoquatlfyfor tax benefits.
Eecausetax [awsare comptexand manytax preparersoften do not haveocca5ionto usetheseuniquetax
benefits,familiesare at risk of tosingrefundsworth thousandsof dottars.tt's (ike(ythat 15%to 30%of
famitieswith a disabtedchild haveone or more unclaimedtax benefits.
Thisguideprovidesa summaryof the most significantfederal incometax benefitsand shoutdnot be
consideredtegatadvice.Tax decisionsshouLdnot be madegimptyon the basisof the informationprovided
here. Youare advisedto print out this guideand give a copy to your tax advisor.Youshoutdatsoexplore
potentiatstate incometax benefits,which are too numerousto reviewin this gujde.
L.a.njng Djsabitjties
Irav.t dnd Learnrng
Media lrd Your Child
Learnnrg5tandards
(
lnternal RevenueService(lRs) PubLicationsrepresentthe most accessibteform of guidanceto the tax rutes
for the generalpublic, and relevantJRSpublicatjonsare cjted for eachof the tax benefitslisted betow.The
IRSatsoissuesinterpretationsof the code and reguLations
catted RevenueRulings.Theseinteeretations
are formaL,bindingpolicystatements.Tax professionats
rety on revenuerulingsin advisingcLientsaboutta-x
tiabilitiesand tax benefits.For exampte,RevenueRuting78-340,discussedLater,authorizesa medicat
expensedeductionfor tuition or tutoring fees paid for a chitd with a severetearningdisabititywho is
attendinga specialschootat the recommendation
of the chitds doctor.
Tax Benefits: Deductions ys. Creditt
Its importantto distinguishbetweentwo categofiesof tax benefits.Onecategoryi9 a deductionfrom
taxableincome orsimply a "deduction. The vatueof a deductionis basedon t he margjnal tax rate of the
taxpayer.lf a personhasa tax deductionworth Sl,000, the actualvatueof the deductionwitt be
determinedby the taxpayer'stax rate. Soa taxpayerin the lowesttax rate bracket, 10%,witl havehis
taxabteincomereducedby 51,000and save5100(10%of 51,000).However,a taxpayerin a higherbracket,
for exampLe,28%,witt havehis taxabteincomereducedby 51,000and save5280(28%of 51,000).
The secondtax benefit is a tax credit, which is a dottar-for-dottarreductionin tax tiability. An individuat
with a tax credit worth 51,000witt havehis tax bitLreducedby 51,000.This meansthat the actuatamount
of taxesis reducedby the amountof the tax credit- However,becausetax lawsand proceduresare very
compticated,othef factorscan influencethe ultjmate valueto the taxpayer.
The fottowingsummarizes
the principaltax benefitsthat may be avaitabteto famitiescaringfor chitdren
with severetearningdisabilities.
Retroactive Claims for Refunds
The IRSallowstaxpaversto fite amendedreturnsand coftectrefundsfor unctaimedtax benefits
retroactiveLy
up to three years.This meansa taxpayercan fite an amendedreturn for the 2005tax year
(andatsofor the 2005and 2007tax years)and ctaim a refundif the return is fiLednot tater than Aprit 15,
2009.(see IRSPubtication17, Your FederatIncomeTax, 2008,pages18-20.)
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187?cpr=200802141d
2/14/2009
Year 2008 Tax Benefitsfor Parentsof ChildrenWith LD - GreatSchools.net
Page2 of 6
BesidesParents, Who Can Claim a Child as a Dependent_1
A reLativecaretaker(e.g., a gmndparentor aunt) or a nonretativecaretaker(e.9., a fosterparentor tegalg ardian)rnay
be abLeto ctaima chitd asa dependentandqualifyfor retatedtax benefits.A retativeca.etakerandthe cnild are not
Standard
requiredto live in the samehorsehotd.^loreinformationjs availabtein IRSPublication501;"Exemptions,
Deductionand FitingInformation; pages9-19: http:/ rwww.irs.qov/pub/Aspdflp501.p{lt.
Eliqibitityjs determinedby a fiv€-parttest. The mostcfiticaLrequirementis that the caretakermust provjdemofe than
hatf of overat(financialsupportfor the child. For example,there may be caseswh€rethe caretakerjs rnakinga
financialconvibutiontoward LD-rclatedexpenses(e.8., privateschoottuition) that repfesentsmorethan
subsrantiat
hatf of the overaLt
costof supportfo. the chitd. ln thosesituations,the caretakefcoutd{At the chitd asa dependentand
A.
.taim the tuition asa medicatexpensedeductionon Schedute
Medical ExDense Deductions
A taxpayermay ctaim a deductionfor medicate/,penses
of the taxpayeror the taxpaye/sdependentslsee
boxformoreinformationondependents).section1.213-1(e)(1)(v)(a)oftheDepartmentoftheTreasury
regulationsprovides,in part, that while ordinaryeducationis not medicalcare, the cost of medicalcare
inctudesthe cost of attendjnga speciatschoolfor a mentatlyor physicattyhandicappedindividuat,if his
conditionis suchthat the resourcesof the institution for atleviatingsuchmentalor physicalhandicapare a
principatreasonfor his presencethere. As such,the lRshas rutedthat tuition and transportationcostsfor a
speciaLschooLthat hasa programdesignedto educatechi[drenwith tearningdisabititiesand amountspaid
for a chitdr tutoring by a teacherspecialtytrained and quatifiedto deat with severelearningdisabjtities
may aLsobe deducted.(RevenueRuling78'340, 1978-2C.B. 124.) Speciat inst.uction,trai ningor therapy,
5uchas Braille, lipreading,signlanguageinstruction,speechtherapyand .emedialaeadinginstruction,
woutd atsobe deductibte.Retatedbooksand materiatscan quaLifyfor the medicatexpensededuction.lRs
PrivateLetter RuLing
8616069(1985PLRL 41) discusses
what typesof conditionsand instructionmay not
quatify.
Generatty,for famiLiesto quaLifyfor the deduction,the chitds doctor must recommendthe speciatschool,
therapyor tutoring, and there must be a medicatdiagnosisof a neu.otogicatdisorder,suchas a severe
leamingdisabitity,madeby a medicatprofessionat.Transportationexpensesfor the speciaLschoolor the
tutor alsoquatifyfor a medicalexpensededuction.lf transportationis by car, the atlowabteexpensein
200Eis 19 cents per miLe(for mjlesdriven from January1 to June 30) and 27 cents per mite (from Juty 1 to
December31), or the actuatcost of operatjngthe vehicte.
Furthermore,deductibtemedicaLexpensesincludeexpensesfor the diagnosisand treatment of physica(
disorders,and traveLand todgingcostsretatedto suchdiagnogisand treatment expenses.Thiscan include
pathotogist,psychotogist,
testing by a speech'Language
neurotogistor other personwith professionat
qualifications.
Note: Expeffes claimed os a medical expensededuction and lotet rcimbursed by on insurance componyor
schooldistri.t (e.9., the serviceis adopteddspart of the child'slndividualizedEducationPtogram,or IEP)
must be reported os taxable income lor the year in which the reimbursements ote rcceived. lf parents
hovepaid for the servicesbut haven'tcloimedthem os a medicolexpense,they shouldaskthat the tchool
district not issoea 1099Jorm in connectionwith the reimbursement.If the schooldistrict does issueo
1099,consultwith a tax adisor dbout how to proceed.
Not everyonewho hasmedicatexpensescan usethem on their tax return. Medicalexpensesmust be
ctaimedon ScheduteA, ltemizedDeductions,and are subjectto certain timitations.First, the famity must
haveitemizeddeductionsthat exceedtheir standarddeductionin order to useScheduteA (about65%of
taxpayersdo not itemizefor this reason).Second,medicalexpensesare atlowedas a deductiononty to the
extent that they exceed7.5%of adjustedgrossjncome,a significantthreshotdfor manyfamities.(SeetRS
PubLication
502, Medicaland DentatExpenses.)
WhatExpenses
Qualifvfor a Tax Deduction?
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Thefoltowingexpenses
re{ommendsthe serviceor treatnent for
mayqualifyfor the deductionif a medicalproiessionat
disorder,slch asa severetearningdisabiLity:
the chitdand there is a medicatdiagnosis
of a neuroLogjcat
. Tuitionfor a privateschoot
. Specialjzed
matenals(e.g., book, softwareandlnstructionatmateriaLs)
. Diagnostic
evatuations(by a privatepractitioner)
. T.ansportation
exp€nses
for a privateschoolor tutof
Health Savings Accounts and Flexible Savings Arrangements
Atternativeapproachesto obtainingtax benefitsin connectionwith medicaLexpensesmay invotveuseof a
medicatexpenses
heatthsavingsaccount(HSA)or a flexible savingsarrangement(FSA).Att the LD-reLated
reviewedabovecan be pajd throughan HSAor FsA\4/ithpretax dottars.An HsAaltowsa workerto useup to
55,800in 2008for famjty coverage,jn pretax incomefor medicalexpenses.An HSAmay onty be opened
when the emptoyeehasa "highdeductible"health insuranceplan. Amountsptacedin an HSAmay be carried
over to folLowingyeaB if not used.
An FSAcan be part of a cafeteria ptan of atternativefringe benefitsoffered by an emptoyer.An employee
can attocatepretax incometo the accountand then withdrawit duringthe year to pay for medicat
expenses.Employersmay atsomakecontributionsto the FSA,and the maximumamountis set by the terms
of the emptoyerptan.Two importantconditlonsare:
1. The amountto be ptacedin the accountmust be determinedby the emptoyeeat the beginningof the
year'
2. Fundsin the FSAthat are not usedby the end of the year are Lost.However,a recent amendment
atlowsa onetimetransferof FsAfundsto an HSA.
humanresourcesoffice can providemore information.At5o,see IRSPubtication969, Heatth
The empLoyer's
SavingsAccountsand OtherTax FavoredHealthPtans.
Deduction for Disability-Related Conferences
(
\
In May2000the IRSissuedRevenueRuting2000-24,which offers guidance and goodnews- for pa.entsof
chitdrenwith djsabitities.Parentswho attend conferencesto obtain medicalinformationconcerning
treatment for and care of their chitd may deductsomeof the costsof attendinga medicalconference
retatedto a dependentschronichealth condition.The jmportant pointsto rememberare:
. Medicalexpensesare deductibleonty to the extent that they exceed7.5%of an individuatsadJusted
grosSincome,and that timitation apptiesto this deductionas wett;
. Costsof admissionand transportatjonto a medica(conferenceretatedto your dependentschronic
heatthconditionare now deductibte,if the costsare primarityfor and essentiaL
to the care of the
dePendent.
. Costsof meatsand lodgingretatedto a conference,however,are not deductibte.(Note,however,
that todging- up to 950per night is deductjbleif you must travel and stayat a hotet white your
dependentis receivingmedicattreatment from a ticensedphysicianin a hospitator a retatedor
equivatent
setting.)
. Costsare primarityfor and ersentialto the care of the dependent"(andthereforedeductibte)if:
. The parent attendsthe conferenceuponthe recommendation
of a medicalprovidertreating
the child:
. The conferencedisseminates
medicalinformationconcerningthe chitds conditionthat may be
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usefuIin makingdecisionsaboutthe treatment or care of the child;
. The primarypurposeof the visit is to attend the conference.Whiteat the conference,the
parentssociatand recreationalactivitiesin the city he or sheis visitingare secondaryto
attendanceat the conference:
. The conferencedeatswith specificissuesrelatedto a medicaLconditjonand doesnot just
relate to generalheatthand wett-being.
Child and DeDendent Care Credit
The Childand DependentCareCredit is attowedfor work-retatedexpensesincurredfor dependentsof the
taxpayer.Generattythe dependentmust be underthe ageof 13. However,if the chitd hasa disabilityand
requiressupervision,the age timit is waived. For exampte,a 16-year-otdwith severeAD/HDand a behavior
disorderwho cannotbe Leftatonewithout adult 5upervision
woutd be a quatjfyingchild for this credit.
Expenses
up to 53,000per year for one quatifyingdependentand up to 56,OOO
for two or more qualifyjng
dependentsare atlowed.Expenses
for regutarchild care services,after,schootprogramsand summercamps
quatify,atthoughovernightsummercampexpensesdo not. paymentsto a aetativeto care for a chitd aLso
qualify, as long as the retativeis not a dependentof the taxpayer.The credit is calcutatedatZ1%to 30%
percentof a(lowabLe
expenses,ba5edon the famitysadiustedgrossincome.The averagecredit js about
5600but can be as highas 52,100.(SeeIRSPubtication503, Chitdand DependentCareExpenses,.)
Exemption for Dependents
A taxpayeris entitled to clalrnan exemptionfor eachquatifieddependent.This may appearreLativety
straightforward,but caretakers,suchas grandparents,auntsor even foster parents,may overtook
exemptions.Atso,in somecasesfoiLowinga divorce,a noncustodiaIparent who providesthe majority of
supportfor a qhitdwith a severelearningdisabitity,and paysfor medical/educatjonat
expensesrelated to
the chitd5 learningdisabitity,may tikewisequalify for both the exemptionand medicatexpensedeductjons.
A new definition of quatifyingchitd took effect in the 2005tax year; the most significantchangeis that
the taxpayerneednot showsupportfor a quatifyingchiLd,but the child must tive with the taxpayerfor
morethan six months.Fo. eachdependent,there is an exemptionfrom taxableincome,worth Sj,500 for
the 2008tax year. For a taxpayerwith a marginattax rate of 25%,eachexemptionwilt reducethe tax
tiabitity by 5875.Equatlyimportant,the dependencystatusis requiredfor sometax benefitssuchas the
child and dependentcare credit hstedabove.Atso,dependentsunderage 17 quatjfyfor the ChjtdTax
Credit, worth up to 51,000 per chitd. (see IRSPubtication501, Exemptions,StandardDeductionand Fiting
Information, and Instructionsto Form 1040.")
Note: The gift tox * which imposesa tax on the donot fot gifts over 513,0(n - genetu(y doesnt appty to
tnyments for medicalexpensesot education-Thisis a complextopic ond shouldbe discussed
with a tox
advisorwhen a taxpayerprovidet, or plansto provide, an amountgreatet that S13,OOO
to onyonenot a
Earned Income Tax Credit
FamiLies
with at leastone chitd fiting a retum as singLeor headof househotdwith adjustedgrossincome
under533,995(536,995for maried taxpayersfiting a joint return) may quaLifyfor the EarnedlncomeTax
Credit (EITC)basedon the presenceof one or two quatr'fying
chitdrenin the taxpaye/shome. For EITC
purposes,a quatifyingchitd i5 a biotogicatchltd, adoptedchitd, stepchitdor foiter chjld who resjdedwith
the taxpayerfor more than six monthsduringthe catendaryear and ls underage 19 at the end of the year.
A quatifyingchild is atsoa chitd ages19 to 23 who js a futt-time studentfor at leastone semester.Finatty,a
severetydisabLed
child is a quaLifyingchitd without regardto age, even into adutthood,as tongas the chitd
contrruesto tive with his parent(s).Notethat a quatifyjngchitd for EITCdoesnot haveto meet the
requirementsfor a dependencyexemption.EITCbenefitsare as high as 54,g24for famitieswith two or
morequdlifyingchiLdren,atthoughthe credit comptetetyphasesout at 541,646.(see tRSpubtication596,
"Earnedlncomelax Credit,'for moreinformation.)
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Where to Get More lnformation
The IRSprovidesfree booktetsthat covereachof the topics tistedabove.The tittes tisted betow may be
orderedby cattingthe IPStotlfree number:(800)829-3676.Generalty,taxpayersmay order up to three
copiesof any pubticationor form. The followingbookletsmay be hetpfut:
. IRSPublicatlon17. Your FederallncomeTax (a comprehensive
guide)
3oo-ptus-page
. IRSPubiication501, Exemptions,ttandard Deductionand Fi{ingInformation'
. IRSPubtication502,'MedjcaIand oentat Expense5
. IRSPublication503, Childand DependentCareExpenses'
. IRSPubticatioa596, farned IncomeTax Credit
. IRSPubticatjon969, HealthSavingsAccountsand Other Tax-FavoredHeatthPlan5'
Extensiveinformationcan alsobe obtainedfrom the lRS.The AmericanBarAssociation5
TaxationSection
containstinksto scoresof tax'felated sites,
Tax Counseling and Tax Preparation Assistance
Certifjedpubljc accountants(CPAs)representone sourceof tax advisors,atthoughnot att CPA5have
expertisein this area. Enrolledagentsare individualslicensedby the IRSto representtaxpayers,and this
groupgeneratlyhasa high degreeof expertise.
Typicatly,chargesfor a tax retuanwith multiptedeductionsand creditswitt cost 5150to 5400.Severat
nationalcompaniesprovidetax preparationand tax counsetingservices.Manyoperateonty duringthe tax,
filing season,but a smatlnumberin targerurbanareasare openyear,round.Feeschargedby the5e
companiesare tower than the fees typicattychargedby CPAS
and enroltedagents.
someparentsmay not be abte to afford fees chargedby professionat
tax prepareas,who genehtty seek
paymentin advance.An option for lower-incomectientsis the VolunteerIncomeTax Assistance(VITA)
program.However,becauseof the votunteersbroadrangeof skittsand expertise,cautionis recommended.
SomeLargecities haveone or more VITAprograhsthat offeaprofessionat-levet
services.A university
accountingdepartmentor the to.at tegaLservicesprogrammay be abte to hetp you identify a high,quatity
VITAprogram.
DlsDutes Mth the IRS
Disputeswith thQ IRSare relativelyrare; tessthan 1.5%of aLlindividualincometax returnsare subiectto
an lRsaudit. However,if the IRSquestionsyour return and you teel an tRSagentis not respondingproperty,
contactthe TaxpayerAdvocatefor assistancetotl,lrcet \877) 777-4778. Low IncomeTaxpayerCtinicsare
anothersourceof help. The IRSfundsmore than 100clinicsto represent{ower,incometaxpayersin disputes
wjth the IRSor state revenuedepartments.CLinicsassisttaxpayersMth incomeunder250%of the poverty
leveL- about 550,000for a famity of four. Someclinics,especiatlythoseattachedto Lawschools,wiLt
representhigher-jncomefamiues.Informationon the neare5tclinic can be obtainedfrom the generatlRs
tolL-freeinquiry number:(800)829-1040.Familiesabovethis inrome (evetshouLdcatt their countyor state
bar association.
Final Thoughts
Thisguideoffers a brief summaryof someof the potentiattax benefitsthat may be avaitabteto you. You
shoutdobtain copiesof the IRSpubticationscited aboveand djscusswith your tax advisorwhether these
benefitsapptyto you. Again,you shoutdnot rely on this guidealoneto determinewftetheryou shouldclaim
any of the tax benefitsreviewedhere.
MichaelA. O Cohnori5 an attorney who promotesawarenessof tax poticiesthat benefit famities.ln
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addition,as a memberof the firm Mauk& Oconnor, LLP,he representsparentsin disputeswith toca[school
districtsconcerningspecialeducationservicesfor leamingdisabtedchitdren.He is a boardmemberof the
Courcil of ParentAttorneys& Advocates(COPAA).
Mon.oe Seifer is a tax attorney 5pecializingin all aspectsof personatincometaxation, inctudingincometax
return preparation.As a former lnternal RevenueServiceagent, he is uniquetyquatifiedto representctients
beforethe UnitedStatesTax Court and assistclientswith auditsand appeats.Monroeis the senior
sharehotderwith the law firm Seifer,Murken,Despina,Jamesand Teichman,ALC,in SanFranciscoand is a
memberof the taxationsectionsof both the State Barof Californiaand AmericanBarAssociation.
Juan Pelayois a tax attorney speciatizingin att aspectsof personatincome,trust and estate, and gift
taxatjon,includingincofte tax return preparation.He is admitted to practicebeforethe UnitedstatesTax
Courtand hasrepresentedand assistednumerousctientswith auditsand appeals.Petayopracticestax law
with the law firm seifer, Murken,Despina,James& Teichman,ALC,in san Franciscoand is a rtember of the
taxationsectionsof both the state Barof Catiforniaand AmericanBarAssociation.
O 2008Greotschoolslnc. All RightsReserved.Originally creoted by SchwobLeoming, lormerly o program
of the Charlesand Helen SchwabFoundotion (i4odified Jonuoty 2009).
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