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 Year
2004 Tax Benefits for Parents of Children with Disabilities
SchwabLearning.org
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This guide
provides a brief summary of the most significant tax benefits
and should not be considered legal advice. Tax decisions should
not be made simply on the basis of the information provided
here. You are advised to print out this guide and give a copy to
your tax advisor.
Internal Revenue Service (IRS) “Publications” represent the most
accessible form of guidance to the tax rules for the general
public, and relevant IRS publications are cited for each of the
tax benefits listed below. The IRS also issues interpretations
of the code and regulations called “Revenue Rulings.” These
interpretations are formal, binding policy statements. Tax
professionals rely on revenue rulings in advising clients about
tax liabilities and tax benefits. For example, Revenue Ruling
78-340, discussed later, authorizes a medical expense deduction
for tuition or tutoring fees paid for a child with a severe
learning disability who is attending a special school at the
recommendation of the child’s doctor. Tip: Relative caretakers,
such as grandparents or aunts, and non-relative caretakers, such
as foster parents, also may qualify for tax benefits. See a
related tax guide of the Casey National Center for Resource
Family Support.
Deduction for Disability Related Conferences
In May 2000 the IRS issued Revenue Ruling 2000-24, which
offers guidance — and good news — for parents of children with
disabilities. Parents who attend conferences to obtain medical
information concerning treatment for and care of their child may
deduct some of the costs of attending a medical conference
relating to a dependent’s chronic health condition. The
important points to remember are:
-
Medical
expenses are deductible only to the extent that they exceed 7.5
percent of an individual’s adjusted gross income, and that
limitation applies to this deduction as well;
-
Costs for
admission and transportation to a medical conference relating to
your dependent’s chronic health condition are now deductible, if
the costs are primarily for and essential to the care of the
dependent.
-
Costs of meals
and lodging related to a conference, however, are not
deductible. (Note, however, lodging, up to $50 per night, is
deductible if you must travel and stay at a hotel while your
dependent is receiving medical treatment from a licensed
physician in a hospital or a related or equivalent setting.)
-
Costs are
“primarily for and essential to the care of the dependent” (and
therefore deductible) if:
-
The parent
attends the conference upon the recommendation of a medical
provider treating the child;
-
The conference
disseminates medical information concerning the child’s
condition that may be useful in making decisions about the
treatment of or caring for the child;
-
The primary
purpose of the visit is to attend the conference. While at the
conference, the parent’s social and recreational activities in
the city he or she is visiting are secondary to attendance at
the conference;
-
The conference
deals with specific issues related to a medical condition and
does not just relate to general health and well-being.
The full text of
IRS Revenue Ruling 2000-24 is available at Amicus for Children,
Inc.
Medical Expense Deductions
The IRS has ruled that tuition costs for a special school
that has a program designed to educate children with learning
disabilities and amounts paid for a child’s tutoring by a
teacher specially trained and qualified to deal with severe
learning disabilities may also be deducted. (Revenue Ruling
78-340, 1978-2 C.B. 124.) Special instruction or training or
therapy, such as sign language instruction, speech therapy, and
remedial reading instruction also would be deductible. Related
books and materials can qualify for the medical expense
deduction.
Generally, to qualify for the deduction, the child’s doctor must
recommend the special school, therapy, or tutoring, and there
must be a medical diagnosis of a neurological disorder, such as
severe learning disability, made by a medical professional.
Transportation expenses to the special school or to the tutor
also qualify for a medical expense deduction. If transportation
is by car, the allowable expense in 2004 is fourteen cents per
mile plus parking and tolls, or the actual cost of operating the
vehicle.
Diagnostic evaluations also qualify for a medical expense
deduction. This can include testing by a speech-language
pathologist, psychologist, neurologist, or other person with
professional qualifications.
Note: Expenses claimed as a medical expense deduction and later
reimbursed by a school district or insurance company must be
reported as taxable income for the year in which the
reimbursements are received.
Not everyone who has medical expenses can use them on their tax
return. Medical expenses must be claimed on Schedule A, Itemized
Deductions, and are subject to certain limitations. First, the
family must have itemized deductions that exceed their standard
deduction in order to use Schedule A (about 65 percent of
taxpayers do not itemize for this reason). Second, medical
expenses are allowed as a deduction only to the extent that they
exceed 7.5 percent of adjusted gross income, a significant
threshold for many families. (See IRS Publication 502, Medical
and Dental Expenses.)
Where to Get More Information
The IRS provides free booklets that cover each of the topics
listed above. The titles listed below may be ordered by calling
the IRS toll-free number: (800) 829-3676. Generally, taxpayers
may order up to three copies of any publication or form. The
following booklets may be helpful:
-
IRS Publication
17: Your Federal Income Tax (a comprehensive 300+ page guide)
-
IRS Publication
502: Medical and Dental Expenses
-
IRS Publication
503: Child and Dependent Care Expenses
-
IRS Publication
501: Exemptions, Standard Deduction and Filing Information
-
IRS Publication
596: Earned Income Tax Credit
-
IRS Publication
969: Health Savings Accounts and Other Tax-Favored Health Plans
Extensive
information can also be obtained from the IRS. The American Bar
Association Section on Taxation contains links to scores of tax
related sites.
Tax Counseling and Tax Preparation Assistance
Certified Public Accountants (CPAs) represent one source of
tax advisors, although not all CPAs have expertise in this area.
Enrolled Agents are individuals licensed by the IRS to represent
taxpayers, and this group generally has a high degree of
expertise.
Typically, charges for a tax return wit h multiple deductions
and credits will cost $150-300. Several national companies
provide tax preparation and tax counseling services. Many
operate only during the tax filing season but a small number in
larger urban areas are open year round. Fees charged by these
companies are slightly lower than the fees typically charged by
CPAs and Enrolled Agents.
Some parents may not be able to afford fees charged by
professional tax preparers, who generally seek payment in
advance. An option for lower income clients is the Volunteer
Income Tax Assistance (VITA) program. However, because of broad
range in skills and expertise of volunteers, caution is
recommended. Some large cities have one or more VITA programs
that offer professional level services. A university accounting
department or the local legal services program may be able to
help you identify a high quality VITA program.
Disputes with the IRS
Disputes with the IRS are relatively rare; less than 1.5
percent of all individual income tax returns are subject to an
IRS audit. However, if the IRS questions your return, and you
feel an IRS agent is not responding properly, contact the
Taxpayer Advocate for assistance toll-free at (877) 777-4778.
Low Income Taxpayer Clinics are another source of help. The IRS
funds more than 100 such clinics to represent lower income
taxpayers in disputes with the IRS or state revenue departments.
Clinics assist taxpayers with income under 250 percent of the
poverty level — about $48,000 for a family of four. Some
clinics, especially those attached to law schools, will
represent higher income families. Information on the nearest
clinic can be obtained from the general IRS toll-free inquiry
number at (800) 829-1040. Families above this income level
should call their county or state bar association.
Final Thoughts
This guide
offers a brief summary of some, but not all, of the potential
tax benefits that may be available to you. You should obtain
copies of the IRS publications cited above and discuss with your
tax advisor whether these benefits apply to you. Again, you
should not rely on this guide alone to determine whether you
should claim any of the tax benefits reviewed here.
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