Deducting Special Education Costs of Children
with Diabilities.
sponsored by the
Stepnowski Law Offices
In the last article, we described deducting medical expenses.
This article discusses when special education costs can be deducted as
a medical expenses.
This article is geared toward helping parents with children with
disabilities understand the tax laws. As a general rule, the
costs if education are considered to be ordinary living expenses and
not deductible. However, if the program is designed to help
someone overcome a medical
disability, it can be deductible. This article lists some of the
laws which will help you make that determination.
Please do not use
this article as definitive advise, as your situation
may vary. Consult your attorney or tax professional.
Definitions of which children qualify as dependents also changes from
year to year, so always check the latest information. Nothing on
this page creates an attorney-client relationship.
We start with the
letter of the law, the tax statute written by Congress. Section 213 of the Internal Revenue
Code states:
There shall be allowed
as a deduction the expenses paid during the taxable year, not compensated
for by insurance or otherwise, for
medical care of the
taxpayer,
his spouse, or a dependent ... For
purposes of this
section
- The term
''medical care'' means amounts paid - For
the diagnosis, cure, mitigation, treatment, or prevention
of disease, or for the purpose of affecting any structure
or function of the body,
Internal Revenue Service Regulations,
26
CFR 1.213-1
The U.S. Treasury, the IRS has issued regulations which are authority
for deducting the costs of special education:
While ordinary education is not medical care, the cost of medical care
includes the cost of attending a special school for a mentally or
physically
handicapped individual, if his condition is such that the resources of
the institution for alleviating such mental or physical handicap are a
principal reason for his presence there. In such a case, the cost of
attending
such a special school will include the cost of meals and lodging, if
supplied,
and the cost of ordinary education furnished which is incidental to the
special services furnished by the school. Thus, the cost of medical
care
includes the cost of attending a special school designed to compensate
for or overcome a physical handicap, in order to qualify the individual
for future normal education or for normal living, such as a school for
the teaching of braille or lip reading. Similarly, the cost of care and
supervision, or of treatment and training, of a mentally retarded or
physically
handicapped individual at an institution is within the meaning of the
term
medical care.
link to full text IRS Regulations on section 213 deductibility 26
CFR 1.213-1 (details, details)
Contains examples of how to calculate the
deduction. Definitions start in 1.213-1(e).
IRS Publication 502- excerpts
The
IRS has also published helpful guidance:
http://www.irs.gov/publications/p502/index.html
(newer link) (link to full document)
Some relevant portions copied here:
- Disabled Dependent Care Expenses
- Learning Disability
- Schools and Education, Special
- Therapy and Patterning Exercises
- Legal Fees
Disabled Dependent Care Expenses
Some disabled dependent care expenses may qualify as medical expenses
or
as work-related expenses for purposes of taking a credit for dependent
care. You can choose to apply them either way as long as you do not use
the same expenses to claim both a credit and a medical expense
deduction.
Learning Disability
You can include in medical expenses tuition fees you pay to a special
school
for a child who has severe learning disabilities caused by mental or
physical
impairments, including nervous system disorders. Your doctor must
recommend
that the child attend the school. See Schools and Education, Special,
later.
You can also include tutoring fees you pay on your
doctor's
recommendation
for the child's tutoring by a teacher who is specially trained and
qualified
to work with children who have severe learning disabilities.
Schools and Education, Special
You can include in medical expenses payments to a special school for a
mentally impaired or physically disabled person if the main reason for
using the school is its resources for relieving the disability. You can
include, for example, the cost of:
- Teaching Braille to a visually impaired child,
- Teaching lip reading to a hearing impaired child, or
- Giving remedial language training to correct a
condition caused by a
birth
defect.
The cost of meals, lodging, and ordinary education supplied by a
special
school can be included in medical expenses only if the main reason for
the child's being there is the resources the school has for relieving
the
mental or physical disability.
You cannot include in medical expenses the cost of
sending a problem
child to a special school for benefits the child may get from the
course
of study and the disciplinary methods.
Therapy
You can include in medical expenses amounts you pay for therapy you
receive
as medical treatment.
“Patterning” exercises. You can include in medical expenses amounts
you pay to an individual for giving “patterning” exercises to a
mentally
retarded child. These exercises consist mainly of coordinated physical
manipulation of the child’s arms and legs to imitate crawling and other
normal movements.
Legal Fees
You can include in medical expenses legal fees you paid that are
necessary
to authorize treatment for mental illness. However, you cannot
include
in medical expenses fees for the management of a guardianship estate,
fees
for conducting the affairs of the person being treated, or other fees
that
are not necessary for medical care.
Our Update: On September 26, 2008, the IRS released a decison which
allowed a taxpayer to deduct the legal fees where the fees were
directly related to the obtaining of medical treatment. The
taxpayer needed to establish a guardianship to commit a family member
for medical treatment which could not be provided otherwise. Thus the
attorney fees and travel expenses for the legal proceeding were
deductible. 2008-0033.(pdf) While
this IRS document is informational only it is supported by existing
law: see Gerstacker v. Commissioner,
414 F.2d 448 (6th Cir. 1969); Rev. R. 71-281.)
top
Special school
qualifies as
medical
expense
In a recent letter ruling (# 200521003) the taxpayers had two
children
who were diagnosed as having disabilities caused by medical conditions
including dyslexia that handicap their ability to learn. School X
provides
each handicapped child with a program of special education designed to
enable the child to deal with the medical handicaps and move on to
study
at a regular school. The IRS noted that normal education is not medical
care because it is not designed to help someone overcome a medical
disability.
Thus, a physician or other qualified professional must diagnose a
medical
condition requiring special education to correct the condition for that
education to be medical care. The school need not employ physicians to
provide that special education, but must have professional staff
competent
to design and supervise a curriculum providing medical care. 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 thus includes teaching Braille to
a visually-impaired person, teaching lip reading to a hearing-impaired
person, giving remedial language training to correct a condition caused
by a birth defect, or overcoming other disabilities. Dyslexia can be
sufficiently
severe as to be such a handicap (Rev. Rul. 69-607). "Deductibility of
tuition
depends on exactly what the school provides an individual because a
school
can have a normal education program for most students, and a special
education
program for those who need it. Thus, a school can be 'special' for one
student but not for another." The IRS ruled that, based on the
taxpayers'
representations, that the children were attending School X principally
to receive medical care in the form of special education in those years
each child is diagnosed as having a medical condition that handicaps
that
child's ability to learn.
Thus, a school doesn't have to be attended exclusively
by children
with
learning disabilities in order for tuition to be deductible if the
other
criteria are met--for just those learning-disabled children who
participate
in a special program in a regular school -- as long as participation in
that program is their principal reason for attending the school.
Caution. A letter ruling is directed only to the
taxpayer requesting
it. It may not be used or cited as precedent, but it is a useful
illustration
of the IRS's thinking.
http://www.irs.gov/pub/irs-wd/0521003.pdf
June 23, 2005
New
IRS confirms special schools qualify as medical expenses
Private Letter Ruling 105788-06
(01/26/2007)
In this case, the neuronpsychologist performed tests and
concluded that Child A needed an educational environment that is more
therapeutic andspecialized to Child A’s disabilities than Child A was
receiving in the special education program at Child A‘s public school.
Accordingly, based strictly
on the information submitted and your representations, we
conclude that School X utilizes special teaching techniques to assist
its students in
overcoming Condition 1. These techniques along with the care of other
staff
professionals are the principal reasons for Child A attending School X.
Further, we
conclude that School X is a “special school” within the meaning of
§ 1.213-1(e)(1)(v)(a)
and that the expenses incurred by Taxpayers for Child A’s tuition at
School X in those
years Child A is diagnosed as having a medical condition that handicaps
Child A’s
ability to learn are deductible under § 213(a).
New Ruling extended to students of college age
Child A has been diagnosed
with several developmental disorders, including an endocrine disorder
that is accompanied by delayed motor, cognitive, and social development
skills; Child A has received numerous comprehensive developmental,
speech and language, educational, and neuropsychological evaluations
from early childhood through age 17 years, 8 months. Her most recent
neuropsychological report stated in part that she will need to have a
support program if she is to attend college. The School provides
a comprehensive program that is designed to provide students who have
learning disabilities of a medical nature with the help and support
they need to complete a college or vocational program and to become
competent and responsible adults. The School’s current population
includes students with low average to gifted IQ’s with various
diagnoses of learning disorders and autistic spectrum disorders.
School’s faculty is a diverse group of over forty professionals, many
of whom hold masters or doctoral level degrees. School does not
provide actual college courses or living facilities. The School
provides assistance to students who are independently enrolled in
neighboring colleges and technical schools.
The IRS applied the rule that the distinguishing characteristic of a
special school is the substantive content of its curriculum, which may
include some ordinary education, but only if the ordinary education is
incidental to the primary purpose of the school of enabling the student
to compensate for or overcome a handicap. Accordingly, the ruling
concludes that the taxpayer may deduct as a medical expense the cost of
his mentally handicapped child's participation in a specially designed,
self-contained course designed to meet the child's needs. The IRS
concluded that the School is a special school
within the meaning of section 1.213-1(e)(1)(v)(a) of the Income Tax
Regulations. Consequently the tuition paid to School for your dependent
Child A was deductible as a medical cost under § 213 of the Code.
PLR-135049-06
July 31, 2007
for more discussion
see the details of medical deductions.
IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the IRS, we inform
you that any U.S. federal tax advice contained in this communication
(including any attachments) is not intended or written to be used, and
cannot be used, for the purpose of (i) avoiding penalties under the
Internal Revenue Code or (ii) promoting, marketing or recommending to
another party any transaction or matter addressed herein.
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