Deductibility of tuition and related fees as medical expenses.

• Author: Goldsberry, Edward

The past several years have seen growing numbers of schools and school programs intended to provide treatment and education to students with learning and other disabilities (including emotional and behavioral disorders). Reasons for this are varied, but certainly include increased awareness and understanding, increased effectiveness in identification and diagnosis and a corresponding increased effectiveness in treatment.

Many programs are costly, and insurance coverage is limited at best. Parents with children who can benefit from these programs often are uninformed (or even misinformed) as to the income tax treatment of these programs' costs. Frequently, parents are not aware that some or all of the cost of such schools or programs may be deductible as medical expenses. Tax advisers can assist parents in determining the deductibility of school tuition and related fees and medical expenses for dependents with disabilities.

Under Sec. 213(a), an individual can take an itemized deduction for expenses paid during the tax year for medical care for the individual and for his or her spouse or dependents, to the extent that such expenses exceed 7.5% of adjusted gross income (AGI). Sec. 213(d)(1)(A) defines "medical expenses" to include amounts paid "for the diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body." Qualifying medical expenses include doctor and dentist fees, hospital and nursing services, laboratory services, prescriptions and drugs and health insurance.

School tuition and fees may meet these tests. According to Regs. Sec. 1.213-1(e)(1)(v)(a), "[w]hile ordinary education is not medical care, the cost of medical care includes the cost of attending a special school for a mentally or physically handicapped individual, if his condition is such that the resources of the institution for alleviating such mental or physical handicap are a principal reason for his presence there." Further, "[i]n such a case, the cost of attending such a special school will include the cost of meals and lodging, if supplied, and the cost of ordinary education furnished which is incidental to the special services furnished by the school." And "... the cost of 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...."

Rev. Rul. 70-285...