Although students with disabilities have a right to a “free and appropriate” public education by law, some families opt out and others pay for a range of supplemental therapies.
In fact, tax rules allow medical deductions for “diagnosis, cure, mitigation, or treatment…primarily to alleviate or prevent a physical or mental defect or illness” (IRS publication 502).
That can include the cost of a school or program if prescribed by a licensed health-care professional. It might even cover costs for a special two-year college certificate program for students with severe learning disabilities, such as the Reach program run by the University of Iowa, which costs as much as $40,000 a year.
The deduction also can be used for additional therapies. Regina Levy, a Los Angeles CPA with two special-needs children, offers a partial list: occupational therapy, music therapy, dance therapy, physical therapy, social-skills groups and “hippotherapy” (horseback riding), among others.
There is an important limit to this break, however. 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 access to a flexible-spending account can use dollars for the same expenses without a threshold, although in 2013 by law the FSA contribution limit drops to $2,500 from the $5,000 that many companies currently allow.
Tax Deductions for Special Education
Category: Tax Deductions /