il2439 Medical expense deduction for special - Chapel Haven

Document Display

Checkpoint ContentsFederal Library

Federal Editoria I f4aterialsPractice Aids

Client LettersSample Explanatory Client Letters

2439 N4edical expense deduction for special education costs

of2

Client Letters

.i l2439 Medical expense deduction for special education costs

To the practitioner:

The subject is discussed in Federal Tax Coordinator fl K-2150 United States Tax Reporter ll 2134.10 .

Dear Cl ient:

You have asked me whether you may deduct the special education costs you are incurring on behalf ofyour chi ld as medical expenses.

Expenses that you incur in order to enable your child to compensate for or overcome disabilities or toprepare your child for future normal education or normal living are deductible medical expenses. Thus,any expenses for therapy that helps your child's adaptation are deductible medical expenses. Inaddit ion, the expenses of your chi ld 's school ing at a "special school" for mental ly or physical ly disabledindividuals are deductible (including the cost of an ordinary education) if the resources of the schoolare the reason for your child's presence and the educational services provided are rendered only as anincident to the medical care provided.

The qual i f icat ion of a school as a special school depends on the school 's curr iculum. Thus, a schoolqualifies as a special school only if the primary focus of its currlculum is to enable students tocompensate for or overcome disabilities, and to prepare them for future normal education or normalliving. For instance, schools that provides special services for children with mental and/or physicaldisabilities, such as schools for the teaching of braille or lip reading are special schools because thepr imary purpose of the schools is al leviat ing or t reat ing a physical handicap. Simi lar ly, schools withspecial programs for treating severe learning. mental, psychological or emotional disorders or dyslexiaare soecia I schools.

In contrast, a school that does not provide a special program/ but is beneficial because of its smallclass size or because it provides added services within a normai academic setting, is not a specialschool, since the primary purpose of the school is academic. However, if an ordinary school is willing todevelop a special program that meets your child's needs, the school will qualify as a special school,s ince the determinat ion of whether a school is a special school is made on the basis of your chi ld 'scurr iculum, not the curr iculum of the school as a whole.

Of course, you cannot deduct any special education expenses to the extent the expenses are borne bythe state or localitv. In addition, the medical expense deduction is limited to the amount that exceeds7.5o/o of your adjusted gross income.

If you have any questions regarding your ability to deduct your special education costs or any otherexpenses that you incur on behalf of your child, please feel free to give me a call.

Very truly yours,END OF DOCUN4ENT -O 2009 Thomson Reuters/RlA. All r ights reserved.

https://checkpoint.riag.com/app/servlet/com.tta.checkpoint.servlet.CPJSPServlet?usid:12f... 2/1512009

Document Display Page I of 2

Checkpoint ContentsFederal Librarv

Federal Editorial MaterialsFederal Tax Coordinator 2d

Chapter K Deductions: Taxes, Interest, Charitable, Medical, OthersK-2100 Expenditures That Qualify as Medical Expenses-Other Than Travel and Transportation

Exoenses.K-2150 Educat ional inst i tut ions-when ful l tu i t ion cost is deduct ible.

Federal Tax Coordinator 2d

flK-2150. Educational institutions-when full tuition cost isdeduct ible.

lYedical care deductions for payments to educational institutions are subject to the institution rules oftl K-2143 . a1 In addition to meeting those rules, for all of the costs of attending a school to bedeductible, the school must be a special school ( ll K-2153 ) for a mentally or physically handicappedindividual ( fl K-2151 ). Also, that person's condition must be such that the resources of the institutionfor alleviating such mental or physical handicap are a principal reason for his presence there ( 1l K-2152 ) . In such a case, the cost of at tending such a special school wi l l include the cost of meals andlodging, if supplied, and the cost of ordinary education furnished by the school if that education isincidental to the special services furnished by the school (see tl K-2154 ), even though ordinaryeducat ion is not medical care. a2

f/ *to observation: Thus, for the full tuition payable to an educational institution to bedeductible, taxpayers must meet a tougher standard than they need meet to deduct thefull fee payable to other non- hospital institutions.

i/ sa-ple €lient letter: Sample client letters on the medical expense deduction forspecial education costs appear in Client Letters fl 2439 .

4 7

Rev Rul 70-285, 1970-1 CB 52 ; Rev Rul 58-280. 1958-1 CB 157 .

42

Reg I 1 .213- l (ex lxvxa) .

For the deductibility of education costs that don't meet the above tests, see fl K-2155 et seq.END OF DOCUIVIENT .O 2009 Thomson Reuters/RlA. All rights reserved.

https://checkpoint.riag.comiapplservlet/com.tta.checkpoint.servlet.CPJSPServlet?usid:12f... 2/1512009

Document Display


Federal Editorial MaterialsFederal Tax Coordinator 2d

Chapter K Deductions: Taxes/ Interest, Charitable, Medical, OthersK-2100 Expenditures That Qualify as lvledical Expenses-Other Than Travel and Transpotation

ExDenses.K-2151 When is a condit ion ser ious enough under the medical expense deduct ion special

school rules.


t lK-2151. When is a condit ion ser ious enough under the medicalexpense deduction special school rules.

In the following cases, the condition involved was serious enough to qualify under the rules for thedeductibility, as a medical expense, of the costs of special schools, discussed at !l K-2150

. . . a neurological disorder, consist ing of impairment in the areas of v isual memory and visualmatching, and resul t ing in a severe learning disabi l i ty wi th respect to reading. aa

.. . emotional problems, such as (a) those resul t ing from the divorce of a chi ld 's parents and thesuicide of her father, manifesting themselves in a refusai to do schoolwork, temper tantrums andvomit ing,4s (b) a chi ld 's low sel f esteem, maladjustment and psychological abuse as a resul t ofhis detr imental relat ionship with his mother, resul t ing in a learning dysfunct ion, ab and (c) an"adjustment reaction of adolescence, severe, with depressive features." 47

.. . severe behavioral problems as a resul t of habi tual drug use. 48

... dyslexia that was sufficiently severe to be a handicap. The dyslexia must have been diagnosedby a physician or other qualified professional as a medical condition that requires specialeducat ion to be corrected.48 l

44

Rev Rul 78-340, L978-2 CB t24

4 5

creisdorf, Lawrence, (7970) 54 Tc 1684

Pazos, Jose, (1987) TC Memo 1987-131 , PH TCN4 f l87131 ,53 CCH TCM 337

47

IRS Letter Ruling 8447014

4B

Urbauer, Charles, (1992) TC Memo 1992-170 , RIA TC Memo !192170 , 63 CCH lCM 2492

44 .1

Page 1 of3


Document Display Page 1 of2

Checkpoint ContentsFederal Librarv

Federal Editoria I N4aterialsFederal Tax Coordinator 2d


Expenses.K-2152 When are the special school's resources the principal reason for its use.


flK-2152. When are the special school's resources the principalreason for its use.

In the following cases, the patient's condition was such that the resources of the institution foralleviating his mental or physical handicaps were a principal reason for his presence there, under therules discussed at f l K-2150 :

. . . a mental ly retarded boy enrol led in a special ly designed curr iculum to meet the needs ofhandicapped children whose I.Q. scores ranged between 50 and 75. The program was designedto educate students who were not able to profit from the education that was being offeredthrough ordinary classroom instruction, but whose intellectual ability indicated the possibility of adegree of scholastic attainment with the help of specially trained teachers and special methodsand mater ials. 49.. . a chi ld who did not cooperate at al l in school and who was often physical ly s ick, apparent ly asresults of her parents divorcing and her father committing suicide. She transferred to a schoolthat was established to provide training to students with learning disabilities, particularlypsychological ones. She attended the school at the recommendation of the psychiatrist who hadbeen giving her therapy. Although it was difficult for her mother from a financial standpoint, sheenrolled the child upon his recommendation in the expectation that the child would be helped toovercome her emotional difficulties and resultant learning handicap. When progress was made inthis regard, the child was withdrawn from the school and began attending public school. s0

.. . a 17-year-old with severe behavioral problems as a resui t of habi tual drug use enrol led in acollege-prepa ratory school designed to address both the educational and emotional needs of itsstudents. The school facilitated students' emotional development through a holistic program thatincluded community interaction, peer support and weekly therapy sessions. The school also useda multifamily therapy program called "Parent/Chjld Communication Groups" to treat students'emotional needs. 1

49

Rev Ru l 70-285, 1970-1 CB 52 .

50

Greisdort Lawrence, (1970) 54 TC 1684 .

1

Urbauer, Charles, (1992) TC Memo 1992-L7O, RIA TC f4emo fl92170 , 63 CCH TCM 2492END OF DOCUMENT -O 2009 Thomson Reuters/RlA. All r ights reserved.


Document Display)ocument Display Page 1 of 5

CheckDoint ContentsFederal Librarv

Federal Editorial Materia lsFederal Tax Coordinator 2d


Expenses.K-2153 What is a special school for purposes of the medical expense deduction.


flK-2153. What is a special school for purposes of the medicalexpense deduction.

The distinguishing characteristic of a special school, for purposes of the rules at 1l K-2150 , is thesubstantive content of its curriculum. The curriculum of a special school may include some ordinaryeducation, but this must be incidental to the primary purpose of the school, which is to enable studentsto compensate for or overcome handicaps, to prepare them for future normal education or normall i v i ng .2

2

Reg 5 1.213-1(e)(1)(v)(a) ; Rev Rul 7O-2a5, 7970-L CB 52 ; Pfei fer, Donald R., (1978) TC l4emo1978-189 , PH TCM fl78189 , 37 CCH TCM 816 , affd(1979, CAr0) 79-2 USTC fl9518 .

The regs state that schools for the teaching of braille or lip reading are special schools because thepr imary purpose of the school is al leviat ing or t reat ing a physical handicap. r Simi lar ly a school wi th aspecial program for treating severe learning disorders due to a neurological disorder 4 or dyslexia a 1 isa special school. And a school that was specifically established to assist students in overcoming variousneurological condit ions and that only accepts students with those condit ions is a special school.4 2

However, overcoming the learning disabilities must be a principal reason for attending the school. Anyordinary education received must be incidental to the special education provided. 4 3

3

Reg 5 1.213-1(e)(1XvXa)

4

Rev Rul 78-340, 1978-2 CB I24

4 . 7

IRS Letter Ruling 200521003 ; IRSLetter Ruling A4O|O24

4 . 2

IRS Letter Ruling 200704001

IRS Letter Rul ing 200521003

https://checkpoint.riag.com/app/servlet/com.tta.checkpoint.servlet.CPJSPServlet?usid=12f...2/1512009

Document Display Page 2 of 5

The regs also state that schools that train the mentally retarded are special schools because thepr imary purpose of the school is al leviat ing or t reat ing a mental or physical handicap. s Thus, a schoolproviding a curriculum designed to meet the needs of handicapped children whose I.Q. scores rangedbetween 50 and 75, in order to educate students who are not able to profit from the education that wasbeing offered through ordinary classroom instruction, but whose intellectual ability indicate thepossibility of a degree of scholastic attainment, with the help of specially tralned teachers and specialmethods and materials is a special school because the primary purpose of the school is to alleviate amental handicap. 6

5

Reg S 1.213-1(e)(1)(v)(a) ; Rev Rul 7t-347, 797r-2 CB rr4

6

Rev Rul 70-285, f97O-I CB 52 .

Similarly, a school whose stated and actual purpose is to provide an environment where average andabove-average students with special learning disabi l i t ies (usual ly emotional or psychological) can learnto adjust and function normally in a competitive classroom situation is a special school where itsresources for alleviating the child's disability are the principal reason for the child's presence in theschool and its educational program is incidental to its medical function. 7 Thus, a school which doesn'tprovide col lege courses or l iv ing faci l i t ies, but instead provides tutor ing and special ized social , academicand independent_l iv ing ski l l development to students with medical ly-related learning disabi l i t ies, is acna. ia l c .h^^ l ' 1

7

Greisdorf, Lawrence D., (1970) 54 TC 1684

IRS Letter Ruling 200729019 .

Also, a psychiatrically oriented boarding school designed to meet the needs of students who have failedto make a satisfactory adjustment in their homes, schools, or social relationships was a special school.The school 's chief emphasis was on mental hygiene and psychological guidance and i t stressed thedevelopment of sound group l iv ing, recognizing the need to deal wi th each chi ld on the basis of hisindiv idual Droblems. o

B

IRS Letter Ruling 8447014 .

There is no requirement that a special school admit only students that are suffering from a mental orphysical disease or defect. The determination as to whether a school is a special school is made withreference to the nature of the services received by the individual with respect to whom a deduction issought, not with reFerence to the general nature of the institution as a whole. 9

I

Sims, Alvin J., (1979) TC N4emo 1979-499, PH TCM 1179499 ,39 CCH TCM 700 .

https://checkpointriag.comlapplservleVcom.tta.checkpoint.servlet.CPJSPServlet?usid:12f... 2/1512009

Document Display Page 3 of5

Thus, the deductibility of the tuition as a medical expense depends on what the school provides to anindiv idual , and not on whether the school is a "special school." A school can have a normal educat ionprogram for most students, and a special education program for those who need it. In other words, aschool can be "special" for one student but not for another. 9 1 Thus, a special curriculum in a regularschool, that is a severable part of the regular school, can meet the Rev Rul 70-285 (footnote 2)definition and thus be considered a special school. 10 Similarly, where a director of military scnoolagreed to accept the taxpayer's physically handicapped and mentally abnormai son as a personalchal lenge and provided one-on-one instruct ion in order to al leviate the chi ld 's short at tent ion span, theschool was a sDecial school. 1 l

9 . 1

IRS Letter Rul ing 200521003

1 0

Rev Rul 70-285, l97o- l CB 52

1 1

Olson, Rolland T., (1964) TC lvlemo t964-325, PH TCM .[t64325 ,23 CCH TCM 2008 .

The courts have rarely considered a "regular" private school to be a special school. Although theindividual attention, small class size, and strict discipli,ne characteristic of good private schools oftenare beneficial to students suffering from mental or physical defects or illnesses, these schools rarely areable to meet the tests of Rev Rul 7O-285 (footnote 2). 12 Thus, where a child is sent to a regularprivate school on a doctor's advice that his speech problems could be alleviated by being with normalchildren at a regular school, the school is not a special school, since no special services are provided. 13

Simi lar ly, where a student was placed in a school whose approach was to place special emphasis on thetraining and development of students whose potential had not yet been reached and whose progresshad been impeded by weak study habits or an inadequate scholastic background, the school was not aspecial school. The school did not have any psychiatric or psychological facilities and did not provideany counseling or therapy for mental and/or emotional problems. ra

Sims, Alvin J., (1979) TC l4emo L979-499 , PH TCM 1179499 ,39 CCH TCM 700 ; Reiff, Jack W., (1974)TC Memo L974-2O, PH TCM l t74021 ,33 CCH TCN4 91 ; Shid ler , Devora R. , (1971) TC Memo 1971-L26 , PH TCM T71126 , 30 CCH TCN4 529 .

1 3

Weinberg, Israel J. , (1969) TC Memo 1969-3 , PH TCM fl69003 , 28 CCH TCM 10 .

14

Pazos, Jose F. , (1987) TC Memo 1987-131 , PH TCM 187131 , 53 CCH TCM 337 .

Where blind or deaf students or students with epilepsy go to private schools because the privateschools allow the students to attend school in a normal setting, the schools are not special schoolsbecause the purpose of the schools is academic, rather than therapeutic. 1s

https://checkpoint.riag.com/app/servlet/com.tta.checkpoint.servlet.CPJSPServlet?usid= I 2f... 2/1512009

Grunwald, Arnold P., (1968) 51 TC 108; lv lart in, James R., (1975) TC Memo 1975-362,1175362 ,34 CCH TCN4 1564 , affd (1977, CA6) 39 AFTR 2d 77-692 , 54A F2d 633 ,77-rShidler, Devora R., (1971) TC Memo 1971-126, PH TCM l t7Lt26 ,30 CCH TCM 529 .

Page 4 of 5

PH TCMusTc 119180 ;

Where a learning disabled or emotionally disturbed student attended a private school on a doctor'srecommendation because of the school's small classes, the school was not a special school. The schoolhad no psychologists or psychiatrists on staff, its administration did not hold the school out to be aspecial school, and the school had a normal curr iculum. 'o

Pfei fer, Donald R., (1978) TC Memo 1978-189 , PH TCM f78189 , 37 CCH TCM 816 , af fd (1979, CA10)79-2 USTC f l9518 ; Reif f , Jack W., (1974) TC l l lemo 1974-20, PH Tclvl l74O2O ,33 CCH TCN4 91 .

The fact that a school provides special services for students with disabilities doesn't necessary makethe school a special school. Thus, a private school, approximately 25olo of the students of which havelearning disabi l i t ies, and which had (a) a learning center to test those students and improve theirlearning ski i ls and (b) an on-campus psychological counsel ing program was not a special school.Although the student spent substantial time availing himself of these special services, he also engagedin a full load of regular classes and extracurrjcular activities, so the regular classes and extracurricularact iv i t ies were not incidental to the al leviat ion of his learning disabi l i t ies. 16 1 Simi lar ly, where alearning disabled student took remedial and academic courses at a private school, the school was a nota special school, since the primary purpose of the school was academic. 16 2

1 6 . 1

Sims, Alvin J., (L979) TC Memo 1979-499 , PH Tclvl 1179499 ,39 CCH Tclvl 700

16.2

Walton, Bruce S., (1982) TC Memo 1982-648 , PH TCM f l82648 ,45 CCH TCM 65 .

In another case, the Tax Court found that the fact that the student dropped out of the school becausehe couldn't meet its academic standards, was an indication that the purpose of the school wasacademic, rather than the allevjation of the student's disability. The court stated that it didn't believethat a special school designed to treat students with learning disabilities would drop a student becausehis iearning disabi l i t ies made him incapable of compet ing with ordinary students. 16 3

1 6 . 3

Pfei fer , Donald R. , (1978) TC Memo t978-r89, PH TCM f l78189 , 37 CCH TCN4 816 , a f fd (1979, CA10)79-2 USTC !t9518 .END OF DOCUMENT -

O 2009 Thomson Reuters/RlA. All rights reserved.

https://checkpoint.riag.com/app/servleVcom.tta.checkpoint.servlet.CPJSPSerwlet?usid- 12f... 2115/2009

Document Display


Federal Ed itorial Materia lsFederal Tax Coordinator 2d

Page 1of2

Chapter K Deductions: Taxes, Interest, Charitable, lYedical, OthersK-2100 Expenditures That Qualify as Medical Expenses-Other Than Travel and Transportation

ExDenses.K-2154 Whether expenditures were for ordinary education incidental to a school's special

services.


flK-2154. Whether expenditures were for ordinary educationincidental to a school's special services.

The cost of ordinary education furnished by a special school ( f K-2153 ) is a medical expense if thateducation is incidental to the special services furnished by the school, see 1l K-2150 .

A 17-year-old with severe behavioral problems as a result of habitual drug use enrolled in a schooldesigned to address both the educational and emotional needs of its students. Tuition at the school wasdeductible. The school required his parents to maintain a "personal account" and "allowance account"failure to maintain the accounts would have resulted in the son's dismissal from the school. Because ofthese conditions put on the two accounts. payments made into them were ordinary costs of education.And they were incidental to the special services provided by the school. 17

7 7

Urbauer, Charles, (1992) TC lvlemo 1992-170 , RIA TC Memo t192170 , 63 CCH rCM 2492 .END OF DOCUMENT -@ 2009 Thomson Reuters/RlA. All r ights reserved,

https://checkpoint.riag.corn/applservlet/com.tta.checkpoint.servlet.CPJSPServiet?usid:12f... 211512009

Year 2008 Tax Benefits for Parents of Children With LD - GreatSchools.net Page 1 of6

, l l

i.li€{-:l'SC6OOIS-lnvolvet parenis. S!.cesstli tiiJ5.

By Grade

L.a.njng DjsabitjtiesIrav.t dnd LearnrngMedia lrd Your Child

Learnnrg 5tandards

(

Year 2008 Tax Benefits for Parents of Children With LDParents of kids with a severe tear0ing disabiLity may be eligibte for vatuable tax benefits. Read our annualupdate.

l\ Nllrhrcl O (l{nii. lvo'rloe Sedi! ,nd Ju6. P.lato

lf you have a chitd with a severe learning disabitity (LD), you may quatify for valuabte tax benefits. lf your

chitd has AD/HD or other physicat, mentat or emotional impairments, you may atso quatlfy for tax benefits.

Eecause tax [aws are comptex and many tax preparers often do not have occa5ion to use these unique taxbenefits, families are at risk of tosing refunds worth thousands of dottars. tt's (ike(y that 15% to 30% offamities with a disabted child have one or more unclaimed tax benefits.

This guide provides a summary of the most significant federal income tax benefits and shoutd not beconsidered tegat advice. Tax decisions shouLd not be made gimpty on the basis of the information provided

here. You are advised to print out this guide and give a copy to your tax advisor. You shoutd atso explorepotentiat state income tax benefits, which are too numerous to review in this gujde.

lnternal Revenue Service (lRs) PubLications represent the most accessibte form of guidance to the tax rutesfor the general public, and relevant JRS publicatjons are cjted for each of the tax benefits listed betow. TheIRS atso issues interpretations of the code and reguLations catted Revenue Rulings. These inteeretationsare formaL, binding policy statements. Tax professionats rety on revenue rulings in advising cLients about ta-xtiabilities and tax benefits. For exampte, Revenue Ruting 78-340, discussed Later, authorizes a medicatexpense deduction for tuition or tutoring fees paid for a chitd with a severe tearning disabitity who isattending a special schoot at the recommendation of the chitds doctor.

Tax Benefits: Deductions ys. Creditt

Its important to distinguish between two categofies of tax benefits. One category i9 a deduction fromtaxable income orsimply a "deduction. The vatue of a deduction is based on t he margj nal tax rate of thetaxpayer. lf a person has a tax deduction worth Sl,000, the actual vatue of the deduction witt bedetermined by the taxpayer's tax rate. So a taxpayer in the lowest tax rate bracket, 10%, witl have histaxabte income reduced by 51,000 and save 5100 (10% of 51,000). However, a taxpayer in a higher bracket,for exampLe, 28%, witt have his taxabte income reduced by 51,000 and save 5280 (28% of 51,000).

The second tax benefit is a tax credit, which is a dottar-for-dottar reduction in tax tiability. An individuatwith a tax credit worth 51,000 witt have his tax bitL reduced by 51,000. This means that the actuat amountof taxes is reduced by the amount of the tax credit- However, because tax laws and procedures are verycompticated, othef factors can influence the ultjmate value to the taxpayer.

The fottowing summarizes the principal tax benefits that may be avaitabte to famities caring for chitdrenwith severe tearning disabilities.

Retroactive Claims for Refunds

The IRS allows taxpavers to fite amended returns and coftect refunds for unctaimed tax benefitsretroactiveLy up to three years. This means a taxpayer can fite an amended return for the 2005 tax year(and atso for the 2005 and 2007 tax years) and ctaim a refund if the return is fiLed not tater than Aprit 15,2009. (see IRS Pubtication 17, Your Federat Income Tax, 2008, pages 18-20.)

http://www. greatschools.net/cgi-bin/showarticle/1 1 87 ? cpr=2008021 41d 2/14/2009

Year 2008 Tax Benefits for Parents of Children With LD - GreatSchools.net Page 2 of 6

Besides Parents, Who Can Claim a Child as a Dependent_1

A reLative caretaker (e.g., a gmndparent or aunt) or a nonretative caretaker (e.9., a foster parent or tegal g ardian) rnay

be abLe to ctaim a chitd as a dependent and qualify for retated tax benefits. A retative ca.etaker and the cnild are not

required to live in the same horsehotd. ̂lore information js availabte in IRS Publication 501; "Exemptions, Standard

Deduction and Fiting Information ; pages 9-19: http:/ rwww.irs.qov/pub/As pdflp501.p{lt.

Eliqibitity js determined by a fiv€-part test. The most cfiticaL requirement is that the caretaker must provjde mofe than

hatf of overat( financial support for the child. For example, there may be cases wh€re the caretaker js rnaking a

subsrantiat financial convibution toward LD-rclated expenses (e.8., private schoot tuition) that repfesents more thanhatf of the overaLt cost of support fo. the chitd. ln those situations, the caretakef coutd {At the chitd as a dependent and.taim the tuition as a medicat expense deduction on Schedute A.

Medical ExDense Deductions

A taxpayer may ctaim a deduction for medicat e/,penses of the taxpayer or the taxpaye/s dependents lseeboxformoreinformationondependents).section1.213-1(e)(1)(v)(a)oftheDepartmentoftheTreasuryregulations provides, in part, that while ordinary education is not medical care, the cost of medical careinctudes the cost of attendjng a speciat school for a mentatly or physicatty handicapped individuat, if hiscondition is such that the resources of the institution for atleviating such mental or physical handicap are aprincipat reason for his presence there. As such, the lRs has ruted that tuition and transportation costs for aspeciaL schooL that has a program designed to educate chi[dren with tearning disabitities and amounts paid

for a chitdr tutoring by a teacher specialty trained and quatified to deat with severe learning disabjtitiesmay aLso be deducted. (Revenue Ruling 78'340 , 1978-2 C.B. 1 24. ) Specia t inst.uction, trai ning or therapy,5uch as Braille, lipreading, sign language instruction, speech therapy and .emedial aeading instruction,woutd atso be deductibte. Retated books and materiats can quaLify for the medicat expense deduction. lRsPrivate Letter RuLing 8616069 (1985 PLR L 41) discusses what types of conditions and instruction may notquatify.

Generatty, for famiLies to quaLify for the deduction, the chitds doctor must recommend the speciat school,therapy or tutoring, and there must be a medicat diagnosis of a neu.otogicat disorder, such as a severeleaming disabitity, made by a medicat professionat. Transportation expenses for the speciaL school or thetutor also quatify for a medical expense deduction. lf transportation is by car, the atlowabte expense in200E is 19 cents per miLe (for mjles driven from January 1 to June 30) and 27 cents per mite (from Juty 1 toDecember 31), or the actuat cost of operatjng the vehicte.

Furthermore, deductibte medicaL expenses include expenses for the diagnosis and treatment of physica(disorders, and traveL and todging costs retated to such diagnogis and treatment expenses. This can includetesting by a speech'Language pathotogist, psychotogist, neurotogist or other person with professionatqualifications.

Note: Expeffes claimed os a medical expense deduction and lotet rcimbursed by on insurance compony orschool distri.t (e.9., the service is adopted ds part of the child's lndividualized Education Ptogram, or IEP)must be reported os taxable income lor the year in which the reimbursements ote rcceived. lf parentshove paid for the services but haven't cloimed them os a medicol expense, they should ask that the tchooldistrict not issoe a 1099 Jorm in connection with the reimbursement. If the school district does issue o1099, consult with a tax adisor dbout how to proceed.

Not everyone who has medicat expenses can use them on their tax return. Medical expenses must bectaimed on Schedute A, ltemized Deductions, and are subject to certain timitations. First, the famity musthave itemized deductions that exceed their standard deduction in order to use Schedute A (about 65% oftaxpayers do not itemize for this reason). Second, medical expenses are atlowed as a deduction onty to theextent that they exceed 7.5% of adjusted gross jncome, a significant threshotd for many famities. (See tRSPubLication 502, Medical and Dentat Expenses. )

What Expenses Qualifv for a Tax Deduction?

http://www.greatschools.neVcgi-bin/showarticle/ 1 1 87 ? cpn=2008021 41d 2n4/2009

Year 2008 Tax Benefitsfor Parents of Children With LD - GreatSchools.net Page 3 of6

The foltowing expenses may qualify for the deduction if a medical proiessionat re{ommends the service or treatnent for

the chitd and there is a medicat diagnosis of a neuroLogjcat disorder, slch as a severe tearning disabiLity:

. Tuition for a private schoot

. Specialjzed matenals (e.g., book, software and lnstructionat materiaLs)

. Diagnostic evatuations (by a private practitioner)

. T.ansportation exp€nses for a private school or tutof

Health Savings Accounts and Flexible Savings Arrangements

Atternative approaches to obtaining tax benefits in connection with medicaL expenses may invotve use of aheatth savings account (HSA) or a flexible savings arrangement (FSA). Att the LD-reLated medicat expensesreviewed above can be pajd through an HSA or FsA \4/ith pretax dottars. An HsA altows a worker to use up to

55,800 in 2008 for famjty coverage, jn pretax income for medical expenses. An HSA may onty be openedwhen the emptoyee has a "high deductible" health insurance plan. Amounts ptaced in an HSA may be carriedover to folLowing yeaB if not used.

An FSA can be part of a cafeteria ptan of atternative fringe benefits offered by an emptoyer. An employeecan attocate pretax income to the account and then withdraw it during the year to pay for medicatexpenses. Employers may atso make contributions to the FSA, and the maximum amount is set by the termsof the emptoyer ptan. Two important conditlons are:

1. The amount to be ptaced in the account must be determined by the emptoyee at the beginning of theyear'

2. Funds in the FSA that are not used by the end of the year are Lost. However, a recent amendmentatlows a onetime transfer of FsA funds to an HSA.

The empLoyer's human resources office can provide more information. At5o, see IRS Pubtication 969, HeatthSavings Accounts and Other Tax Favored Health Ptans.

Deduction for Disability-Related Conferences

In May 2000 the IRS issued Revenue Ruting 2000-24, which offers guidance and good news - for pa.ents ofchitdren with djsabitities. Parents who attend conferences to obtain medical information concerningtreatment for and care of their chitd may deduct some of the costs of attending a medical conferenceretated to a dependents chronic health condition. The jmportant points to remember are:

. Medical expenses are deductible onty to the extent that they exceed 7.5% of an individuats adJustedgrosS income, and that timitation appties to this deduction as wett;

. Costs of admission and transportatjon to a medica( conference retated to your dependents chronicheatth condition are now deductibte, if the costs are primarity for and essentiaL to the care of thedePendent.

. Costs of meats and lodging retated to a conference, however, are not deductibte. (Note, however,that todging - up to 950 per night is deductjble if you must travel and stay at a hotet white your

dependent is receiving medicat treatment from a ticensed physician in a hospitat or a retated orequivatent sett ing.)

. Costs are primarity for and ersential to the care of the dependent" (and therefore deductibte) if:

. The parent attends the conference upon the recommendation of a medical provider treatingthe child:

. The conference disseminates medical information concerning the chitds condition that may be

(

\

htto://www. ereatschools.neVcsi-bin/showarticle/1 1 87?con:200802 1 4ld 2/14n009


usefuI in making decisions about the treatment or care of the child;

. The primary purpose of the visit is to attend the conference. White at the conference, theparents sociat and recreational activities in the city he or she is visiting are secondary toattendance at the conference:

. The conference deats with specific issues related to a medicaL conditjon and does not justrelate to general heatth and wett-being.

Child and DeDendent Care Credit

The Child and Dependent Care Credit is attowed for work-retated expenses incurred for dependents of thetaxpayer. Generatty the dependent must be under the age of 13. However, if the chitd has a disability andrequires supervision, the age timit is waived. For exampte, a 16-year-otd with severe AD/HD and a behaviordisorder who cannot be Left atone without adult 5upervision woutd be a quatjfying child for this credit.

Expenses up to 53,000 per year for one quatifying dependent and up to 56,OOO for two or more qualifyjngdependents are atlowed. Expenses for regutar child care services, after,schoot programs and summer campsquatify, atthough overnight summer camp expenses do not. payments to a aetative to care for a chitd aLsoqualify, as long as the retative is not a dependent of the taxpayer. The credit is calcutated atZ1%to 30%percent of a(lowabLe expenses, ba5ed on the famitys adiusted gross income. The average credit js about5600 but can be as high as 52,100. (See IRS Pubtication 503, Chitd and Dependent Care Expenses,.)

Exemption for Dependents

A taxpayer is entitled to clalrn an exemption for each quatified dependent. This may appear reLativetystraightforward, but caretakers, such as grandparents, aunts or even foster parents, may overtookexemptions. Atso, in some cases foiLowing a divorce, a noncustodiaI parent who provides the majority ofsupport for a qhitd with a severe learning disabitity, and pays for medical/educatjonat expenses related tothe chitd5 learning disabitity, may tikewise qualify for both the exemption and medicat expense deductjons.A new definition of quatifying chitd took effect in the 2005 tax year; the most significant change is thatthe taxpayer need not show support for a quatifying chiLd, but the child must tive with the taxpayer formore than six months. Fo. each dependent, there is an exemption from taxable income, worth Sj,500 forthe 2008 tax year. For a taxpayer with a marginat tax rate of 25%, each exemption wilt reduce the taxtiabitity by 5875. Equatly important, the dependency status is required for some tax benefits such as thechild and dependent care credit hsted above. Atso, dependents under age 17 quatjfy for the Chjtd TaxCred it, worth up to 51 ,000 per chitd. (see IRS Pubtication 501 , Exemptions, Standard Deduction and FitingInformation, and Instructions to Form 1040.")

Note: The gift tox * which imposes a tax on the donot fot gifts over 513,0(n - genetu(y doesn t appty totnyments for medical expenses ot education- This is a complex topic ond should be discussed with a toxadvisor when a taxpayer providet, or plans to provide, an amount greatet that S13,OOO to onyone not a

Earned Income Tax Credit

FamiLies with at least one chitd fiting a retum as singLe or head of househotd with adjusted gross incomeunder 533,995 (536,995 for maried taxpayers fiting a joint return) may quaLify for the Earned lncome TaxCredit (EITC) based on the presence of one or two quatr'fying chitdren in the taxpaye/s home. For EITCpurposes, a quatifying chitd i5 a biotogicat chltd, adopted chitd, stepchitd or foiter chjld who resjded withthe taxpayer for more than six months during the catendar year and ls under age 19 at the end of the year.A quatifying child is atso a chitd ages 19 to 23 who js a futt-time student for at least one semester. Finatty, aseverety disabLed child is a quaLifying chitd without regard to age, even into adutthood, as tong as the chitdcontrrues to tive with his parent(s). Note that a quatifyjng chitd for EITC does not have to meet therequirements for a dependency exemption. EITC benefits are as high as 54,g24 for famities with two ormore qudlifying chiLdren, atthough the credit comptetety phases out at 541,646. (see tRS pubtication 596,"Earned lncome lax Credit,'for more information.)

http ://www. greatschools.neVcgi-bin/showarticle/ 1 1 87?cpn:200802 1 4ld 2/14t2009

Year 2008 Tax Benefits for Parents of Children With LD - GreatSchools.net Page 5 of6

Where to Get More lnformation

The IRS provides free booktets that cover each of the topics tisted above. The tittes tisted betow may beordered by catting the IPS totlfree number: (800) 829-3676. Generalty, taxpayers may order up to threecopies of any pubtication or form. The following booklets may be hetpfut:

. IRS Publicatlon 17. Your Federal lncome Tax (a comprehensive 3oo-ptus-page guide)

. IRS Pubiication 501, Exemptions, ttandard Deduction and Fi{ing Information'

. IRS Pubtication 502,'MedjcaI and oentat Expense5

. IRS Publication 503, Child and Dependent Care Expenses'

. IRS Pubticatioa 596, farned Income Tax Credit

. IRS Pubticatjon 969, Health Savings Accounts and Other Tax-Favored Heatth Plan5'

Extensive information can also be obtained from the lRS. The American Bar Association5 Taxation Sectioncontains tinks to scores of tax'felated sites,

Tax Counseling and Tax Preparation Assistance

Certifjed publjc accountants (CPAs) represent one source of tax advisors, atthough not att CPA5 haveexpertise in this area. Enrolled agents are individuals licensed by the IRS to represent taxpayers, and thisgroup generatly has a high degree of expertise.

Typicatly, charges for a tax retuan with multipte deductions and credits witt cost 5150 to 5400. Severatnational companies provide tax preparation and tax counseting services. Many operate onty during the tax,filing season, but a smatl number in targer urban areas are open year,round. Fees charged by the5ecompanies are tower than the fees typicatty charged by CPAS and enrolted agents.

some parents may not be abte to afford fees charged by professionat tax prepareas, who genehtty seekpayment in advance. An option for lower-income ctients is the Volunteer Income Tax Assistance (VITA)program. However, because of the votunteers broad range of skitts and expertise, caution is recommended.Some Large cities have one or more VITA prograhs that offea professionat-levet services. A universityaccounting department or the to.at tegaL services program may be abte to hetp you identify a high,quatityVITA program.

DlsDutes Mth the IRS

Disputes with thQ IRS are relatively rare; tess than 1.5% of aLl individual income tax returns are subiect toan lRs audit. However, if the IRS questions your return and you teel an tRS agent is not responding property,contact the Taxpayer Advocate for assistance totl,lrcet \877 ) 777 -47 78. Low Income Taxpayer Ctinics areanother source of help. The IRS funds more than 100 clinics to represent {ower,income taxpayers in disputeswjth the IRS or state revenue departments. CLinics assist taxpayers Mth income under 250% of the povertyleveL - about 550,000 for a famity of four. Some clinics, especiatly those attached to Law schools, wiLtrepresent higher-jncome famiues. Information on the neare5t clinic can be obtained from the generat lRstolL-free inquiry number: (800) 829-1040. Families above this inrome (evet shouLd catt their county or statebar association.

Final Thoughts

This guide offers a brief summary of some of the potentiat tax benefits that may be avaitabte to you. Youshoutd obtain copies of the IRS pubtications cited above and djscuss with your tax advisor whether thesebenefits appty to you. Again, you shoutd not rely on this guide alone to determine wftether you should claimany of the tax benefits reviewed here.

Michael A. O Cohnor i5 an attorney who promotes awareness of tax poticies that benefit famities. ln

http ://www.greatschools.net/cgibin/showarticle/1 I 87?cpn=200802 1 4ld 2tI4/2009


addition, as a member of the firm Mauk & Oconnor, LLP, he represents parents in disputes with toca[ schooldistricts concerning special education services for leaming disabted chitdren. He is a board member of theCourcil of Parent Attorneys & Advocates (COPAA).

Mon.oe Seifer is a tax attorney 5pecializing in all aspects of personat income taxation, inctuding income taxreturn preparation. As a former lnternal Revenue Service agent, he is uniquety quatified to represent ctientsbefore the United States Tax Court and assist clients with audits and appeats. Monroe is the seniorsharehotder with the law firm Seifer, Murken, Despina, James and Teichman, ALC, in San Francisco and is amember of the taxation sections of both the State Bar of California and American Bar Association.

Juan Pelayo is a tax attorney speciatizing in att aspects of personat income, trust and estate, and gifttaxatjon, including incofte tax return preparation. He is admitted to practice before the United states TaxCourt and has represented and assisted numerous ctients with audits and appeals. Petayo practices tax lawwith the law firm seifer, Murken, Despina, James & Teichman, ALC, in san Francisco and is a rtember of thetaxation sections of both the state Bar of Catifornia and American Bar Association.

O 2008 Greotschools lnc. All Rights Reserved. Originally creoted by Schwob Leoming, lormerly o programof the Charles and Helen Schwab Foundotion (i4odified Jonuoty 2009).

Get more great tips to keep your chitd on track! Sign up for our newsletters ,

Related Links

Fiiancrai Aid for Education tor Student! wrth LD - cLrides and ResoumesFinanciat Arsistarrce for Pa.ents of Kids with LD and AD/HD

http://www. greatschools.neVc gi-bin/showarticle/1 I 87?cpn:200802 I 4ld 2/14/2009

il2439 Medical expense deduction for special - Chapel Haven

Documents

Transcript of il2439 Medical expense deduction for special - Chapel Haven