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Tax Breaks for Parents of Kids with Disabilities

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In part two of this four-part series, tax guru Julian Block discusses the tax breaks that are available to those who have children with disabilities. Here, he goes over the costs associated with schooling children who have disabilities and how your clients can claim these school-related expenses, as well as what expenses qualify as deductible medical travel

Nov 5th 2021
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If you’re just joining us, go back to part one for an overview of medical-expense deductions for people with disabilities and how to advise clients who pay for medically mandated home improvements or the installation of accessible equipment or facilities in their home.

Part two will focus on deductibility of costs associated with schooling children who have physical or mental disabilities. While the rules are fairly straightforward when a client pays for her family’s doctors and dentists, they become more complicated when she wants to deduct payments toward schooling a child with a disability.  

Deductibility will depend on whether the child attends a school with special education services as opposed to one that does not, as the costs of the former may be allowable medical expenses. The IRS will look at whether the child’s main reason for going to a school is to take advantage of the resources available for children with disabilities. It’s fine if the school provides typical education services, as long as the learning is “incidental” to the medical care.

Some obvious examples of schools that qualify are those that teach Braille to people who are blind or lip reading to those who are hearing impaired or give remedial language training to correct conditions caused by congenital disabilities.

Your client can also deduct the cost of meals and lodging at a school with special education services, as well as any travel expenses.

However, for costs incurred from sending a child to a school without special education services, the IRS will require your client to show that some portion of her payment is specifically for medical treatment; otherwise, there will be no deduction. It makes no difference whether a doctor concludes that the child will benefit from the curriculum, disciplinary methods or other nonmedical advantages available at a school without special education services.

Note that the IRS takes a particularly hard line against allowing any medical deduction for private schooling of a child who has minor disciplinary problems. 

While the agency’s factual approach isn’t necessarily the final word in tax disputes, the courts usually uphold its restrictive definition of a school with special education services, though, as a general rule, each decision turns on its own set of facts. 

Here’s a case in point. An affluent New York couple thought themselves entitled to sizable deductions for what they spent to send their son to a boarding school, because they did so on the advice of a psychiatrist who believed that the school’s structure and environment would help the boy’s psychological problems. Nevertheless, a district court agreed with the IRS that the school could not be categorized as one providing special education services. The court also noted that the school didn’t specialize in problems like the boy’s and had no psychiatrist or psychologist on staff. It mattered not that that the educational services were beneficial to the boy’s health and well-being.

Deductible medical travel includes a good deal more than trips to doctors. For example, the following trips qualify:

  • Transporting seeing-eye dogs or other service animals to veterinarians.
  • Traveling with an ailing spouse to a hospital for surgery because the spouse needs assistance communicating.

However, the IRS says medical travel doesn’t include the cost of driving to work when a person is unable to use public transportation because of an illness or disability. Revenue Ruling 55-261 says people with physical disabilities can’t deduct fares for cabs required to transport them to and from work.

What’s next? Column three will discuss tax breaks for home sellers who have disabilities. 

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