The High Cost
of Helping Your Child
By Peg Brody
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Tax Laws: One Way to Offset Educational and Medical Costs
If your child isn’t a candidate for a scholarship or grant, or if you have additional tutoring or related expenses and don’t want to apply for a loan, the Internal Revenue Service (IRS) tax code can offer a break.
The IRS recently ruled that children who have been diagnosed with dyslexia and attend a school with a program designed to allow them to deal with their learning disability can claim the tuition expense as a medical deduction. Similarly, parents of children diagnosed with Attention Deficit Hyperactivity Disorder or other physical, mental or emotional impairments might also qualify for tax benefits. The key is that overcoming the disability must be the reason for attending the school, according to the tax code.
The IRS ruled that if a child attends a school primarily to receive medical care in the form of special education, then the tuition as well as the cost of meals and lodging supplied by the school are medical expenses. Special instruction, training or therapy such as sign language instruction, speech therapy and remedial reading instruction are also deductible. Diagnostic evaluations also qualify as medical expenses. This includes testing by a speech-language pathologist, psychologist, neurologist or other medical professional.
The IRS allows taxpayers to deduct only those medical expenses that exceed 7.5 percent of their adjusted gross income. It’s important to note that if a medical expense later is reimbursed by a school district or insurance company, that amount must be reported as taxable income for the year the reimbursement was received.
If a parent or guardian wishes to deduct the cost of private schooling for a child with learning disabilities, several factors should be considered to determine the likelihood that the school qualifies as a “special school”. First, a doctor, psychiatrist, psychologist or other trained specialist must make a medical diagnosis of a neurological disorder. That professional must then recommend the special school, therapy or tutoring in order for the expenses to qualify for the deduction.
Another factor that must be considered is the expertise and training of the school’s staff. Staff must have specialized training in psychology, therapy or learning disabilities. The programs and resources offered must be designed to educate children with learning disabilities.
In addition, the curriculum of the school must provide therapy and medical services beyond that found in a typical private school. The services of a specialist must be part of the regular program of the school, and the educational training must enhance medical care. Talk with your tax advisor or refer to relevant publications from the IRS (www.irs.gov) for more information.
Therapy: An On-going Expense for Some Families
In addition to paying for tuition and other educational expenses, some families have the added stress of financing ongoing speech and occupational therapies for their children.
While there are a variety of options available for low-income families, many people are caught in the middle. Their income is too high to qualify for programs, and they can’t afford to spend tens of thousands of dollars each year to pay for therapy or on-going medical needs. Parents can find some relief for these expenses through their public school system, the Deeming Waiver, Scottish Rite and other support organizations.
Deeming Waiver (Formerly Called Katie Beckett Waiver)
The Deeming Waiver provides Medicaid insurance to a child whose parents have an income too high to qualify for Supplemental Security Income (SSI). The child must have less than $2,000 in assets, unless the money has been set up as a special needs trust or an educational fund or given under the Uniform Minor Gift Act.
New criteria were established for all applications filed on or after November 15, 2004. Under the new guidelines, acceptance is not based on specific medical diagnoses, but rather on medical necessity. The guidelines also stipulate that the child must require the level of care provided in a hospital, nursing facility or intermediate facility. The services provided, however, do not have to take place in these facilities but must be comparable. In addition, the guidelines require that five therapies be performed each week.
In order to be considered for the deeming waiver, the following criteria must be also met:
- The child must be less than 18 years old;
- The child must meet Social Security disability criteria;
- Caring for the child at home must cost less than nursing home care;
- The child must be ineligible for SSI because of the income and/or assets of parents.
The Deeming Waiver has to be renewed each year. If denied, the family may appeal. Medicaid will continue, but if the appeal is denied, the parents are responsible for the charges incurred.
The process of applying for the Deeming Waiver can be a long and laborious one, so it pays to do some research first. A variety of Web sites offer information on the Deeming Waiver including:
Once you have done your research and are ready to apply, the first step is to contact a Medicaid worker at your county’s Division of Family and Children Services (DFCS). You can visit www.dfcs.dhr.georgia.gov or your county’s Web site.
Next, schedule an appointment to find out documentation you need to bring with you. DFCS will provide you with the forms and tell you where to receive help to fill them out. Also when applying, make sure the child is ineligible for SSI. DFCS or the Social Security office can offer advice on this issue.
Before you submit your forms, it might help to go over them with someone who is knowledgeable about the process. One resource is Family Services Unlimited. For a fee, the company provides assistance with filling out the forms needed to obtain the Deeming Waiver.
Phillip Todd of Family Services Unlimited, explained: “The Deeming Waiver focuses on the independence of a child and what you have to do for your child. Parents often want to paint the best scenario, but a child’s limitations have to be presented, including a description of what you, as a parent, do on a daily basis. Therapists don’t see the daily routine at home, and in order to be accepted, there has to be a definite need for services.”
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