There are many tax deductions and credits available for parents of children with special needs. Parents of children with special needs should familiarize themselves with the deductions and credits and document all expenses related to their children’s medical expenses, development and therapy. Below you will find five useful tax deductions and credits for parents of children with special needs.
1. Medical & 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 as:
- Special schooling like 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 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.
2. Specialized Foods
A gluten-free, casein-free diet can be used as a deduction provided it is medically recommended. Most times, only the additional cost of the specialized foods over and above what would similar items would cost is deductible.
3. Legal Expenses
In some instances, legal expenses related to your child’s special needs may be deductible, for example if you hire an attorney to help prove that your child’s medical expenses are legitimate.
A tax credit 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 scenarios, a credit that is typically only available for children may also be used for an older child with special needs.
4. Child and Dependent Care Credit
This 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 dependents. 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.
(Related: Planning for a Loved One with Special Needs)
5. Earned Income Credit
The Earned Income 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.
Careful planning with the assistance of an experienced attorney who is sensitive to special needs issues can ensure you do what is necessary to reduce your tax burden and protect your child’s interests. Marc Wander is an experienced Special Needs Attorney ready to help you and your child with special needs.
Marc H. Wander is a partner of the Bloomfield Hills law firm of Witzke, Berry, Carter &Wander, PLLC. Marc has been licensed to practice law in Michigan since 1992. Marc’s practice is devoted to estate planning and business succession planning. Marc is a member of the Probate and Estate Planning Section of the State Bar of Michigan and is a prior Chairperson of the Oakland County Bar Association Tax Committee. He is a frequent continuing education speaker to insurance agents, financial advisors, CPA’s and financial industry organizations. He has also been heard on WJR Radio. Follow Marc on Twitter @MarcWander