Special Education Deduction

by John Anthony Castro, J.D., LL.M.

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Introduction

Parents with special needs children know too well that the costs associated with special needs education can be burdensome. So a natural question during tax season is whether it’s possible to deduct any of the special education expenses.

Background

In Private Letter Ruling 200521003, the IRS favorably ruled that a taxpayer may deduct expenses paid during the tax year for medical care of the taxpayer’s dependents within the limits of Section 213, Medical Expenses.

The Full Scope of Medical Expenses

Under Section 213(d)(1)(A), “medical care” includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting a structure or function of the body. Education affects the function of the brain and mitigates the natural limitations of many medical conditions.

Normal education is not medical care because it is not designed to help someone overcome a medical disability. Special education, however, may rise to the level of medical care.

A physician or other qualified professional must diagnose a medical condition requiring special education to correct the condition for that education to be medical care. The school need not employ physicians to provide special education, but must have professional staff capable of designing and supervising a curriculum providing medical care. Overcoming the learning difficulties must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. Examples of special education under Reg. 1.213-1(e)(1)(v)(a) include:

  • Teaching Braille to a visually-impaired person.
  • Teaching lip reading to a hearing-impaired person.
  • Giving remedial language training to correct a condition caused by a birth affect.

In Revenue Ruling 69-607, the IRS ruled that dyslexia can be sufficiently severe as to be such a handicap. Autism should be covered as well.

It is also critical to note that a school does not have to entirely be a “special school” for the tuition to be deductible. Under Treasury Regulation 1.213-1(e)(1)(v)(a), deductibility of tuition depends on what the school provides an individual; a school can be “special” for one student but not for another.

Qualifying Conditions

A neurological disorder consisting of impairment in the areas of visual memory, visual matching, and resulting in a severe learning disability with respect to reading has been held to qualify.[1]

Emotional problems, such as (a) those resulting from the divorce of a child‘s parents and the suicide of her father, manifesting themselves in a refusal to do schoolwork, temper tantrums and vomiting,[2] (b) a child‘s low self-esteem, maladjustment, and psychological abuse as a result of his detrimental relationship with his mother resulting in a learning dysfunction,[3] and (c) an “adjustment reaction of adolescence, severe, with depressive features”[4] has been held to qualify. Dyslexia has also been held to qualify.[5]

Severe behavioral problems as a result of voluntary, habitual drug use has been held to qualify.[6]

Special Education Expenses

As outlined in PLR 200521003, an official diagnosis and determination that special education is required will generally permit the full deduction of all expenses.

Closing

Don’t misinterpret the IRS’s 2005 issuance of a single favorable PLR to mean that they won’t audit this issue and assess penalties if claimed incorrectly. Our firm offers truly 100% free consultations. We offer that as a public service, so please use it. Contact us, speak with us, and let us give you professional legal advice with regard to your specific situation. There’s no risk, so contact us now.

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About the Author

John Anthony Castro, J.D., LL.M., is the Managing Partner of Castro & Co., the author of International Taxation in Plain English as well as International Estate Planning in Plain English, an esteemed graduate of Georgetown University Law Center in Washington DC, an OPM Fellow at Harvard Business School, and an internationally recognized tax attorney with offices in New York, Los Angeles, Miami, Chicago, Dallas, and Washington DC.

To provide feedback on this article or suggest an idea for a future article, please contact Tiffany Michelle Hunt, J.D., LL.M., Director of Tax Planning at Castro & Co., at T.Hunt@CastroAndCo.com.


Bluebook Citation: John Anthony Castro, Title of Article, YY Int’l Tax Blog ## (Month ##, 201#) url.


[1] Rev. Rul. 78-340.

[2] Greisdorf v. C.I.R., 54 T.C. 1684, 1685 (1970).

[3] Pazos v. C.I.R., T.C. Memo 1987-131 (1987)

[4] PLR 8447014.

[5] PLR 200521003.

[6] Urbauer v. C.I.R., (1992) T.C. Memo 1992-170 (1970).

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