by Yolanda R-L Baker – Exclusive to Health News Texas
author of “B.I.T.E. Your Bills: A Four Point Plan to Cut Your Medical Expenses“
Developmental disabilities are on the increase. There are more than six million special needs children in the U.S., and the ranks continue to grow. Those affected by autism alone grew more than 70% in the last seven years.
What medical expense tax deductions are available to families with a disabled or chronically ill dependent? The Internal Revenue Service (IRS) tax code can help—if you know where to look.
Research has found numerous, often-overlooked, deductions that include:
- Homeopathic and naturopathic remedies
- Gluten-free, casein-free, and soy-free food products
- i-Pad applications (but currently not the iPad)
- Service animal adoption fees, training fees, and health care costs
Families with special need members need to be clear how the IRS defines a medical expense.
According to IRS Publication 502, Medical and Dental Expenses, the agency defines a deductible medical expense as “the costs of diagnosis, cure, mitigation, treatment or prevention of disease, and the costs for treatments affecting any part or function of the body …the costs of equipment, supplies, and diagnostic devices … to alleviate or prevent a physical or mental defect or illness.”
A common question many caregivers ask concerns special education. What makes a special education school a medical expense versus an educational expense?
The IRS places numerous requirements on medical expense deductions for special needs, but one of the more interesting is a medical educational deduction.
The IRS allows the cost of a school or program if prescribed by a licensed health-care professional. The agency might even allow deducitons for special college programs for students with severe learning disabilities that can average nearly $40,000 a year.
The U.S. Tax Court and the Internal Revenue Code list other criteria that include:
- A school must assist a child with overcoming a learning disability. (This must be the main reason for attending the school.)
- The learning disability must be caused by a mental, physical, or nervous system disorder.
- A special program for the learning disabled must be offered alongside a regular curriculum.
- Education to improve a child’s attitude, poor study habits, weak academic performance, and/or disciplinary issues is not a medical expense.
A complete list of allowable deductions can be found at the IRS online website or from various IRS publications.
The tax filing date of April 15th is rapidly approaching, but don’t panic.
If you’re trying to finish your taxes but have piles of documents, talk with your CPA or tax professional. They should offer a tax organizer to properly document expenses. If you don’t have all the receipts and statements for your medical expenses, find as many as you can or call the institutions and ask for duplicates.
Receiving a refund?
If you feel the need for extra time to find all the medical expenses you are legally entitled to deduct, inform your tax preparer so arrangements can be made.
Do you owe the IRS?
Request to file an extension. You have until October 15th to submit your final tax return, however you must send an estimated amount due to the IRS by April 17th (the 15th this year lands on a Saturday). Between April 17th and October 14th don’t procrastinate. Work with providing your preparer properly documented receipts for your expenses.
The Tax Season Never Ends
Organization is the key to receiving all allowable tax deductions available to families with special needs. Some tips for successfully achieving your goals include:
- Tax season is yearlong. Your situation is unique compared to most families; it requires more paperwork and record keeping effort.
- Tax season should be a habit. Remember to keep, document and file all receipts associated with care.
- Find an organizational style that suits your personality. Do you scan paperwork? Do you have one inbox or several? Do you file a document right away, or do you take your time to analyze it?
- Consider an app that helps with organization. Applications like Evernote can be effective for storing paperwork electronically.
The special needs family or caregiver often feels alone in the struggle to provide every opportunity allotted, especially when it comes to tax preparation. Always remember, you’re not alone. The key is finding the proper tax partner; a CPA or preparer that has a proven track record of filing returns for those who need help most.
About the Author:
Yolanda Ruiz-Leon Baker is an Austin-based accountant and the author of “B.I.T.E. Your Bills: A Four Point Plan to Cut Your Medical Expenses” (B = Budget, I = Insurance, T = Taxes, and E = Employer-Sponsored Plans). Although not a tax preparer, she has extensive experience in health insurance issues, medical tax deductions and assisting special needs families. She can be reached at: [email protected].