By Bernard A. Krooks, J.D., CPA, LL.M., CELA
January 6, 2015
Parents of children with special needs often have unique financial concerns, and one way to ease those concerns is to reduce their tax burden.
There are many tax deductions and credits available that parents may not be aware of. Parents of children with special needs should familiarize themselves with the deductions and credits and take care to document all expenses related to their children’s medical expenses, development and therapy.
Here are 5 useful tax deductions and credits for parents of children with special needs.
1.) Medical and Therapy Expenses
The first type of deduction to consider is for medical and therapy expenses. For income tax purposes, learning disabilities are a type of medical condition. This may include autism, ADHD, cerebral palsy, and other learning disabilities.
While these expenses are limited by 7.5 percent of adjusted gross income, the limitation may be exceeded by certain types of out-of-pocket expenses.
Such expenses can include the following:
- Special schooling such as: tutoring that is specifically intended to address the special needs of the child.
- Regular education when it is intended to treat the child’s special needs.
- Aides that a child may require to benefit from education.
- Exercise programs, if they are recommended by a medical professional.
- Transportation to and from special schools or therapy sessions.
- Equipment, devices and supplies necessary to treat or alleviate a medical condition, including technology items such as communication devices.
A gluten-free, casein-free diet can be used as a deduction provided it is medically recommended. Generally, only the additional cost of the specialized foods over and above what would be paid for similar items is deductible.
3). Legal Expenses
In some cases, legal expenses related to your child’s special needs may be deductible, for instance if you hire an attorney to help you prove that your child’s medical expenses are legitimate.
Even more helpful than a tax deduction is a tax credit, which applies directly to the amount of tax you owe. The tax credits most helpful to parents of special needs children are the Child and Dependent Care Credit and the Earned Income Credit. In both cases, a credit that is normally only available for children may also be used for an older child with special needs.
4.) Child and Dependent Care Credit
The Child and Dependent Care Credit may be applied when you pay someone to care for your dependent, and it provides a tax credit of up to $3,000 per dependent, to a maximum of $6,000 for all dependants. Child-care, after-school programs and day camp qualify for the credit.
The credit is available for children under the age of 13, but the age limit does not apply to older children with special needs.
5.) Earned Income Credit
The Earned Income Credit can also be useful for parents of children with special needs. The credit generally may be applied by families with a low to moderate income and children under the age of 19, or up to age 23 for full-time students. However, for adult children living with their parents, the age limit does not apply.
Parents of children with special needs know that there are unique challenges involved, including financial hurdles. However, with careful planning and the assistance of an experienced attorney who is sensitive to special needs issues, you can make sure you do what is necessary to reduce your tax burden and protect your child’s interests.
About the Author
Bernard A. Krooks, J.D., CPA, LL.M (in taxation), CELA, is a founding partner of the New York law firm Littman Krooks LLP. A nationally noted expert on special needs planning, he is past President of the Special Needs Alliance, a national non-profit organization dedicated to assisting families with special needs planning and related issues.
Mr. Krooks may be reached at (212) 490-2020 or via email at firstname.lastname@example.org. For more information on special needs planning, visit the firm’s website at www.littmankrooks.com.