By Greg Fallon
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Many parents with children who are learning disabled fail to take advantage of numerous tax deductions. The cost of providing learning disabled children with the tools and support they need can be expensive, even with disabilities as common as dyslexia and attention deficit hyperactivity disorder. Many of these costs, including less obvious expenses such as tuition, tutoring, and special schools, can be deducted as medical expenses, but most taxpayers neglect to do so. Additionally, starting in 2013, the amount of these expenses combined with other medical expenses must exceed 10% of the taxpayer’s adjusted gross income (1040 line 38) before they can be deducted. Therefore, taxpayers with high incomes may receive no benefit from these medical deductions.
Dyslexia and ADHD
The IRS has defined dyslexia as a medical condition that handicaps a child’s ability to learn. When a doctor diagnoses a child with dyslexia, it qualifies as a medical condition, and the parents can deduct expenses for special education and instruction as medical deductions (Letter Ruling 200521003). The IRS also views attention deficit hyperactivity disorder as a medical condition so long as its degree of symptoms are determined by a doctor to materially affect the child’s ability to learn (Private Letter Ruling 9852015). Therefore, taxpayers with children affected by ADHD need to document that their doctor has diagnosed their child as having ADHD and that it handicaps the child’s ability to learn. Parents of children with dyslexia or ADHD should have their child evaluated and diagnosed by a specialist if possible to document the medical condition.
Many parents of learning disabled children learn early on that without special attention their child will struggle greatly or even give up on learning in a traditional system. Special programs such as tutoring, enrollment at a special school, or enrollment in a special program at a traditional school are expensive, and parents paying for these services in most cases can deduct these costs as medical expenses. In order for tuition to be deductible, the IRS will examine the curriculum taught to ensure that it is specially designed for the learning handicap. When the child attends a special school, then all of the tuition may be deducted. A school qualifies as a special school if the amount of ordinary education it teaches is incidental only to its special program. Also, a regular school can be classified as a special school for an individual if the curriculum the individual receives is for special education. The special school’s primary purpose must be to teach its students how to compensate for or overcome their handicap or to prepare them for future education in a standard environment. However, schools or programs that are designed to improve a student’s attitude or behavior problem are not viewed by the IRS as a treatment of a medical problem (military/reform schools). The more common situation with learning disabled children is a mix of regular education and special education. When a school provides both regular and special education, and the regular education is more than incidental, the taxpayer must segregate the cost and deduct only the tuition related to the special education.
Lodging, Meals, and Travel:
When a taxpayer’s child attends a special school the costs for lodging, meals, and transportation will be deducted in full. Therefore, when a child attends a special school where they must live away from home, the parents may deduct the tuition as well as the room and board and travel costs.
Some learning disabled children may require private tutoring. Private tutoring may be deducted as a medical expense when the tutor is a specially trained teacher who is qualified to deal with learning disabilities and the child’s doctor has recommended such tutoring (Rev. Rul. 78-340). Parents who wish to deduct these expenses need to document the doctor’s recommendation and the qualifications of the tutor/teacher.
If you believe the combination of your regular medical deductions with the above deductions will exceed 10% of your adjusted gross income, then tracking and deducting these costs will save you money. If you cannot get past the 10% barrier, you may be able to use an employer FSA health care plan (Flex Spending) to pay for these expenses, but these plans are limited to $2,500 per individual, resulting in a maximum of $5,000 for both parents.
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Gregory A. Fallon, EA, MST, CPA