Tax Deductions for Parents

If the ads for tax preparation services haven't yet gotten your attention, then perhaps the pile of W-2 and 1099 forms in your mail basket might. It's time to think about taxes.

For the past several years we have reminded parents that they may be able to deduct certain expenses they incur for their child's special education. As set out in IRS Publication 502, the cost of tuition at a school with a program designed to help a student overcoming a diagnosed learning disability is generally deductible. Likewise, special instruction or tutoring outside of school, such as a certified reading instructor for a student with a diagnosis of dyslexia, may be deductible.

Other items that parents should consider for deduction include transportation to therapy appointments, and technology that is designed to enable a child to benefit from special education, such as text-to-speech programs, other specialized technology, and devices such as hearing aides.

These deductions are considered medical expenses and are subject to limitations as are all medical deductions. Raising children is expensive, and raising a child with special educational or medical needs is even more so. Make sure you speak with your accountant or tax preparer to take advantage of all the deductions to which your family is entitled.

photo: philiptaylor cc

Our Annual Tax Reminder

As you begin pulling together the various forms that have arrived in the mail over the last few weeks, and vow that this will be the year that you get your taxes done well in advance of April 15th, we want to remind you that you may be able to deduct certain expenses you incur in connection with a child's special education needs.

IRS Publication 502, Medical and Dental Expenses, contains an extensive list of expenses that may be deductible as medical expenses, subject to the limits that apply to all medical deductions. These expenses may include tuition at a private, special education school, attendence at special education conferences, and tutoring fees for students with learning disabilities.

There are conditions and restrictions on all of these deductions. An excellent and extensive discussion on this entire topic from 2009, now on the Great Schools website, is still a useful overview of this subject. Only a tax professional can give you specific guidance on this issue, but you may want to read the IRS publication or look at our 2011 Tax Tips post to help you ask the right questions.

Tax Tips

If you haven't looked at the calendar lately, just a glance at your mailbox and the envelopes from your bank, your employer, and others with your 2010 income statements should have clued you in to the fact that tax preparation season is upon us.

Families of children with learning challenges should be aware of some tax deducations available for special education and related services. A good starting point is IRS Publication 502, Medical and Dental Expenses for 2010 Returns. This publication outlines the key principal behind deducting these expenses -- they need to be considered as medical expenses. As the IRS notes,

"You can include in medical expenses fees you pay on a doctor’s recommendation for a child’s tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments, including nervous system disorders.

You can include in medical expenses the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities. A doctor must recommend that the child attend the school. Overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. Special education includes:
• Teaching Braille to a visually impaired person,
• Teaching lip reading to a hearing-impaired person, or
• Giving remedial language training to correct a condition caused by a birth defect.

You cannot include in medical expenses the cost of sending a problem child to a school where the course of study and the disciplinary methods have a beneficial effect on the child’s attitude if the availability of medical care in the school is not a principal reason for sending the student there."

While the IRS Publication can serve as a starting point for exploring this issue, much of the nuance in what is deductible and what is not can be found in IRS Rulings. One terrific resource for understanding both the tax law and understanding how it might -- or might not -- benefit your family can be found in a lengthy article on the helpful website LDonline. Note that this was prepared in 2009, but little has changed in this area of the law since then. Of course, deductions for special education services are subject to the same limits as other medical expenses and may not be fully deductible for that reason.

It is important to remember that only your accountant can give you tax advice applicable to your personal situation, and that none of us here are tax experts. But whether you do your own taxes with pencil and calculator, or use tax preparation software, or hand over your year's information to your accountant, remember to keep in mind that there may be tax benefits from some of the expenses your family has encountered as you have dealt with your child's learning difficulties.

Tax Tips for Families

As April 15th approaches families of students who may have special learning needs should be mindful of the tax deductions and other considerations that may help reduce the impact of private school tuition, special medical services, and some support services. The key to these benefits is that medical expenses are deductible, with limits, from your tax return. This will be the case for dependent children and, of course, for young adults who file their own tax returns.

The best discussion of these issues that we have seen can be found on the website Great Schools. Keep in mind that although some of the language in that article refers to serious learning disabilities, families of children with all kinds of learning difficulties may be eligible for tax benefits, so long as their child's school program is designed to remediate the specific learning difficulty. The key is to be aware of the issues and to raise them with your tax advisor (or keep them in mind as you use your tax preparation software). We all know raising kids is expensive. Being aware of tax benefits can help!