Introduction to tax credits  for parents of children with diabilities.

sponsored by the Stepnowski Law Offices

In the last article, we described deducting medical expenses.  This article discusses credits.
This article is geared toward helping parents with children with disabilities understand the tax laws.

Please do not use this article as definitive advice, 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.

The Child and Dependent Care Credit

The IRS provides a Child and Dependent Care Credit  for the work-related expenses incurred for dependents of the taxpayer. In most cases, the dependent must be under the age of 13, but if the child has a disability and requires supervision, there is no age limit. For example, a 17-year-old with a behavior disorder who cannot be left without adult supervision would be a qualifying child for this credit.

Ordinarily the credit is available only for children under the age of 13, but the credit is available to a dependent of any age who is "physically or mentally not able to care for himself," namely: "Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves."

You can list your expenses up to $3,000 per year for one qualifying dependent and up to $6,000 for two or more qualifying dependents. Since the Feds designed this tax benefits to help parents keep jobs, the IRS allows you to list expenses for regular childcare services, after-school programs,  or summer day camp but not programs such as an overnight summer camp expenses. Payments to a relative to care for a child also qualify, as long as the relative is not a dependent of the taxpayer. The benefit of the credit is 20 to 35 % of the allowable expenses, depending on the family’s adjusted gross income. Thus, the credit can be worth $600 for one child with $3,000 after school expenses, and $2,100 for more than one child.

For more information, see IRS Publication 503, Child and Dependent Care Expenses.

These credits do not get deducted on your schedule A deductions, and so are not limited by the threshold amounts.  The credit is given on the back of your form 1040.

Earned Income Tax Credit

If your adjusted gross income (AGI) is below $37,263 for couple filing jointly ($1,000 less for taxpayers filing as single or head of household),  you  may qualify for the Earned Income Tax Credit (EITC) if you have one or two “qualifying children” in the taxpayer’s home. For the EITC, a “qualifying child” is a biological child, adopted child, step child, or foster child who resided with the taxpayer for more than six months during the calendar year, and is under age 19 at the end of the year.  A “qualifying child” is also a child age 19-23 who is a full-time student for at least one semester. Finally, a severely disabled child is a “qualifying child” without regard to age, even into adulthood, as long as the child continues to live with his parent(s).  A “qualifying child” for EITC does not have to meet the requirements for a dependency exemption.  EITC benefits are as high as $4,400 for families with two or more qualifying children, but your amount will vary depending on the number of children and yuor income.

See IRS Publication 596 for more information.

These credits do not get deducted on your schedule A deductions, and so are not limited by the threshold amounts.  The credit is given on the back of your form 1040.

The Illinois Education  Credit

The State of Illinois allows a  tax credit of  25% of educational expenses up to $2000, excluding the  first $250.   That means if you pay $2250 in educational expenses, you can take a credit of $500, which is 25% of  $2,000. 

Since many parents must supplement their childrens' learning at home, such as an ABA program, this credit can help.

“Qualified education expenses” shall mean amounts incurred on behalf of a
qualifying pupil in excess of $250 for tuition, book fees, and lab fees at the school
in which the qualifying pupil is enrolled during the regular school year ....
Amounts incurred for tuition, book fees and lab fees by a family
that is the custodian of more than one qualifying pupil may aggregate all tuition,
book fees and lab fees incurred by the family in arriving at qualified education
expenses eligible for the credit.

School expenses may be for public, private or home school:

“School”, for purposes of the education expense credit, means any public or
nonpublic elementary or secondary school in Illinois ...
[N]othing shall be construed to require a child to attend any particular public or
nonpublic school in order to qualify for the education expense credit ... Private
schools providing educational instruction in the home, attendance at which
meets the compulsory education requirements of Section 26-1 of the School
Code, are included within the meaning of “school” for purposes of the education
expense credit.

Students through grade 12 qualify:
   "Qualifying pupils" means individuals who
(i) are residents  of  the
State  of  Illinois,
(ii)  are  under the age of 21 at the close of the
school year for which a credit is sought, and
(iii)  during  the  school
year  for  which  a credit is sought were full-time pupils enrolled in a
kindergarten through twelfth grade education program at any  school,  as defined in this subsection.

For a  full  discussion and more details on the Illinois Education Tax  credit see this page.

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.