Tax Deductions for Special Education and Related Therapies

Dec 14, 2011 | Mary Poole

The tax code can help parents raising children who fall into the “special needs” category – that is if you know where to look. According to an article published in the Wall Street Journal Weekend Edition on November 12-13, in an article written by Laura Saunders, there are numerous tax breaks parents can take advantage of as they care for their special needs child.  Most of know that there are tax breaks for education, but few know that the most important one for parents with special needs children is not technically an “education break”, it falls under the medical expense category.

Although our kids are entitled to a “free and appropriate” education, many parents opt for alternatives and supplemental therapies for which they pay for themselves. These families can use the tax breaks under the medical expenses to cope with the costs. The tax code provides deductions for “ diagnosis, cure, mitigation, or treatment…primarily to alleviate or prevent a physical or mental defect or illness” (IRS publication 502).  This can include costs associated with a school or special program, additional therapies such as occupational therapy, music therapy, dance therapy, physical therapy, social-skills groups and hippotherapy (horseback riding) to name just a few.

There are additional items which can be counted if the educational program or therapy qualifies for a deduction: travel costs, food and lodging at a specialized school, cost for the parent to attend a relative conference. It should be noted that since these deductions are listed under the medical expense category they are subject to those rules. Medical expenses are deductible only above a threshold of 7.5% of adjusted gross income, or 10% for those who owe alternative minimum tax. Families with a flexible medical spending account can use those dollars for the same expense without a threshold. Remember though, due to recent federal  healthcare legislation the flexible medical spending account contribution limit drops to $2,500 from $5,000 in 2013.

Getting sound tax advice should be the first step for any family considering utilizing these deductions. According to Mike Walther, a tax advisor out of Deerfield, Illinois a family should:

  • Establish the medical need for the special education or the therapy.
  • Make sure that the treatment is prescribed by a licensed healthcare professional.
  • Keep very detailed records supporting the deduction such as; prescription, cancelled checks, mileage logs and invoices.

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