Is There a Tax Credit for Special School Tuition?

Sara F Gonzalez
Highlights of the article:
  • Deductions for medical expenses
  • What qualifies as a 'special school'
  • Private letter rulings explained
  • What deductions are available to you?

 

The cost of medical care is a component of itemized deductions. The taxpayer's adjusted gross income is reduced by 7.5 percent of the sum of qualified medical expenses paid throughout the tax year (AGI).

You are probably familiar with the majority of the medical expenses that qualify for the deduction. These include payments for the doctor and dental care, surgeries, prescription drugs, and other commonly encountered medical costs. However, you may not be aware of one type of eligible medical expense: the cost of a child attending a special school. A special school will be one that is intended to support a child with a physical or mental disability, as they learn. Special schools includes a school where Braille or lip reading is taught. The primary motivation for enrolling a child in the special school must be the school's particular resources for learning and disability support.

The cost of enrolling a child at a special school can be prohibitive for the child's parents. It can be difficult to access the support offered, particularly if this kind of care is not covered by health insurance. If you are currently finding there are financial obstacles to your child’s care and education, please get in touch with us. 

If the parents' total itemized deductions exceed their standard deduction, they can benefit from the tax legislation, which permits them to deduct the following as qualifying medical expenses:

• The cost of meals and accommodation incidental to attendance of the school

• The cost of meals and accommodation provided by the school itself

      • The substantive content of a special school's curriculum, which may include some general education, but only if the general education is secondary to the school's principal goal of assisting students to live with their disability (e.g learning sign language).

The IRS said in a confidential letter ruling that tuition paid to attend a special school constituted a deductible medical expense for a child diagnosed with multiple learning disorders. These medical expenses are only deductible if the school’s primary purpose is to support disabled students to develop their social and communication skills.

The IRS determined that a school is a "special school" if it uses specific teaching approaches to aid its students in working through the obstacles that their disability might present them with. For example, a special school for blind children must teach the students to read Braille. These techniques- combined with the care of other staff professionals- must be the primary reason for the child's enrolment at the school. As a result, the child's school tuition expenses are deductible. They are deductible in the year when the child is diagnosed with a medical condition that may limit their ability to learn in a mainstream school.

Note: The IRS issues private letter rulings in response to a taxpayer's request for guidance on a specific issue or complex scenario. A private ruling applies solely to the unique tax issue at hand, cannot be used as precedent by other taxpayers, and does not obligate the IRS to take a similar stance in the future. A ruling, on the other hand, provides insight into the IRS' view on the subject and can sometimes lead to a broader revenue ruling that affects all taxpayers. Please be aware, when submitting a request for a private ruling, the taxpayer is compelled to pay a charge, which is sometimes several thousand dollars.

In other cases, the Tax Court has held, and the IRS has privately ruled, that even if a school attended by a disabled student does not qualify as a special school (because the ordinary education isn't incidental to the special services provided) the costs of the special programme or special treatment (but not the entire tuition) may still be a deductible medical expense. 

We appreciate that this ruling is complex, and that there are subtleties that could make your financial planning difficult. We recognise that parents of disabled children often have big financial decisions to make, and we hope we can help you to access all of the support and guidance available to you.

Please contact us if you have any questions about this or other medical deductions.

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