Information on Tax Benefits

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Dear Friend of ASO:

Two different articles that include information that could be helpful at tax time. FYI - Please share.

Sincerely,

Barbara C. YavorcikPresidentAutism Society of Ohio701 S. Main St.Akron, OH 44311(330) 376-0211fax: (330) 376-1226email: askASO@...home: byavorcik@...web: www.autismohio.org Please note: This is provided for information purposes only. The ASO does not endorse or recommend any providers, methodologies or services. Providing this information should not be construed as an endorsement by the ASO, either explicit or impiled.

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Year 2006 Tax Benefits for Parents of Children with Learning Disabilitieshttp://www.schwable arning.org/ articles. aspx?r=1130If you have a child with a severe learning disability, you may qualify for valuable tax benefits. If your child has AD/HD, or other physical, mental, or emotional impairment, you may also qualify for tax benefits. Because tax laws are complex, and many tax preparers often do not have occasion to use these unique tax benefits, families are at risk of losing refunds worth many thousands of dollars. It's likely that 15-30 percent of families with a disabled child have one or more unclaimed tax benefits.This guide provides a summary of the most significant federal income tax benefits and should not be considered legal advice. Tax decisions should not be made simply on the basis of the information provided here. You are advised to print out this guide and give a copy to your tax advisor. You should also explore potential state income tax benefits, which are too numerous for review in this guide.Internal Revenue Service (IRS) "Publications" represent the most accessible form of guidance to the tax rules for the general public, and relevant IRS publications are cited for each of the tax benefits listed below. The IRS also issues interpretations of the code and regulations called "Revenue Rulings." These interpretations are formal, binding policy statements. Tax professionals rely on revenue rulings in advising clients about tax liabilities and tax benefits. For example, Revenue Ruling 78-340, discussed later, authorizes a medical expense deduction for tuition or tutoring fees paid for a child with a severe learning disability who is attending a special school at the recommendation of the child's doctor.Tax Benefits: Deductions vs. CreditsIt's important to distinguish between two different categories of tax benefits. One category is a "deduction from taxable income" or simply "a deduction." The value of a deduction is based on the marginal tax rate of the taxpayer. If a person has a tax deduction "worth $1,000," the actual value of the deduction will be determined by the taxpayer's tax rate. So a taxpayer in the lowest tax rate bracket, 10 percent, will have taxable income reduced by $1,000, and save $100 (10 percent of $1,000). However, a taxpayer in a higher bracket, for example, 28 percent, will have taxable income reduced by $1,000, and save $280 (28 percent of $1,000).The second tax benefit is a tax credit, which is a dollar-for-dollar reduction in tax liability. An individual with a tax credit worth $1,000 will have his tax bill reduced by $1,000. This means that the actual amount of taxes is reduced by the amount of the tax credit. However, because tax laws and procedures are very complicated, other factors can influence the ultimate value to the taxpayer.The following summarizes the principal tax benefits that may be available to families caring for children with severe learning disabilities.Retroactive Claims for RefundsThe IRS allows taxpayers to file amended returns, and collect refunds for unclaimed tax benefits, retroactively up to three years. This means a taxpayer can file an amended return for the 2003 tax year (and also for the 2004 and 2005 tax years) and claim a refund if the return is filed not later than April 15, 2007. (See IRS Publication 17, Your Federal Income Tax, 2005, at pp. 18-19.)----------------------------------------------------------

Tuition at school to treat learning disabilities is deductible medical expense (02/01/2007)

Federal Taxes Weekly Alert, 02/01/2007, Volume 53, No. 05

Tuition at school to treat learning disabilities is deductible medical expense

PLR 200521003

IRS has privately ruled that tuition for a child diagnosed with multiple learning disabilities at a school designed to assist students in overcoming their disabilities and developing appropriate social and educational skills was a deductible medical expense.

RIA observation: Treating a child's learning disabilities can place a heavy financial burden on parents. As the new ruling illustrates, the tax law may help by allowing a deduction for the cost of educating such a child. However, like other deductible medical expenses, this cost is deductible only to the extent that medical expenses for the year cumulatively exceed 7.5% of the taxpayer's adjusted gross income.

Background. Medical care includes the cost of attending a special school designed to compensate for or overcome a physical handicap, in order to qualify the individual for future normal education or for normal living. This includes a school for the teaching of braille or lip reading. The principal reason for attending must be the special resources for alleviating the handicap. The cost of tuition for ordinary education that is incidental to the special services provided at the school, and the cost of meals and lodging supplied by the school, also is included as a medical expense. ( Reg. § 1.213-1(e)(1)(v)(a) ) The distinguishing characteristic of a special school is the substantive content of its curriculum, which may include some ordinary education, but only if the ordinary education is incidental to the school's primary purpose of enabling students to compensate for or overcome a handicap. ( Rev Rul 70-285, 1970-1 CB 52 )

Facts. A taxpayer we'll call has a child diagnosed with several developmental disorders. A neuropsychologist concluded that the child needed an educational environment that is more therapeutic and specialized to his disabilities than he was receiving in the special education program at the local public school. As a result, enrolled her child in a special school at the beginning of tenth grade. Students are enrolled in the school only if they do not have strong visual/spatial abilities, which in turn severely limits their ability to process information in typical classroom settings. However, the students enrolled in the school generally do have strong auditory processing strengths. The school focuses on these strengths and its techniques do not depend on presenting information in a visual manner. The school employs a wide variety of professionals such as special-ed teachers and mental health specialists.

The school's program is designed to assist its students in overcoming their disabilities by using techniques that help them develop appropriate social and educational skills that will assist them in their pursuit of higher education.

Tuition is a medical expense. IRS ruled that the school uses special teaching techniques to assist its students in overcoming their condition and that these techniques along with the care of other staff professionals are the principal reasons for 's enrolling her child at the school. The school is a “special school†within the meaning of Reg. § 1.213-1(e)(1)(v)(a) and 's expenses for her child's tuition at the school in those years he is diagnosed as having a medical condition that handicaps his ability to learn are deductible under Code Sec. 213(a) .

RIA observation: The Tax Court has held and IRS has privately ruled that, where a school attended by a student with a medical problem doesn't qualify as a special school because the ordinary education isn't incidental to the special services provided, the costs of the special program or special treatment (but not the entire tuition) may still be a deductible medical expense.

References: For education as a medical expense, see FTC 2d/FIN ¶ K-2150 et seq.; United States Tax Reporter ¶ 2134.10 ; TaxDesk ¶ 347,507 et seq.; TG ¶ 18818 . © Copyright 2007 RIA. All rights reserved.