Essential Tax Tips for Families with Disabled or Special-Needs Children

The responsibility and care for a disabled or special-needs child can be challenging. Often, parents must juggle medical appointments, therapy sessions, and educational needs alongside their everyday responsibilities. One area where families may need guidance is understanding which medical expenses can be deducted on their tax returns. Properly identifying and claiming these deductions can provide significant financial relief, offsetting the considerable costs of care.

However, taking medical deductions depends on your Adjusted Gross Income (AGI) and your ability to itemize. Since the Tax Cuts and Jobs Act of 2018, most married filing jointly households have taken the standard deduction, ranging from $24,000 to $29,200 over the past six years. Furthermore, medical expenses are only deductible once they exceed 7.5% of your AGI.

While these numbers create a significant hurdle, there are several tax-deductible expenses related to the care of a disabled or special-needs child that are generally not covered by insurance. If medical care requires visits to another city for specialists or treatments, travel expenses like lodging, meals at a hospital, and mileage are deductible. Likewise, some of the costs for attending medical conferences related to the child’s disease or condition may be deductible, as these conferences may connect you with experts, introduce different forms of care, and provide support from other families dealing with the same condition.

The cost of tuition may be deductible if your doctor has recommended your child attend a specific school or specialized program for medical reasons, such as, referring a dyslexic child to a school that specializes in educational skills for learning disabilities. If attendance is not entirely for medical reasons, the school administration can typically allocate a percentage of tuition for special services that will qualify for a medical deduction. Other expenses like non-hospital institutions, therapeutic centers, and nursing services may also be included in medical expenses.

Home modifications providing accessibility for a disabled child may also qualify as medical expenses. Although there is no specific threshold or limit for home renovations, the taxpayer must demonstrate how the expenditure is related to the medical care of the dependent. For example, if your child uses a wheelchair, you may be able to deduct expenses for replacing a tub with a walk-in shower. However, high-end marble tile would not count as a medical expense. Providing a letter from the child’s doctor that explains the type of modifications that would be medically beneficial can help to prove a medical need.

We recommend working closely with doctors and tax professionals to document and maintain thorough records should the IRS require substantiation for any deductions. Moreover, since many costs are incurred annually, it may be beneficial to work closely with your tax adviser to lower your AGI.

If your child has a lifelong disability, consider obtaining a medical power of attorney so you can communicate with doctors once your child becomes an adult. You may also consider working with a financial professional to set up a special needs trust protecting your child’s access to government benefits should your child inherit your assets someday.

If you have questions on how you may benefit from tax-deductible expenses, the experts at Henssler Financial will be glad to help: