Discussion:Special Schooling for Dyslexia student

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Discussion Forum Index --> Tax Questions --> Special Schooling for Dyslexia student

Bobw12 (talk|edits) said:

30 July 2007
The link here for the PLR indicates that the payment of special school tuition for children with dyslexia is a deductible medical expense. I would like to know if whether or not the payments made by GRANDparents on behalf of the child's education at the special school would also be deductible.

Link to the PLR: http://www.irs.gov/pub/irs-wd/0521003.pdf

Kevinh5 (talk|edits) said:

30 July 2007
is the grandchild a dependent of the grandparents?

JAD (talk|edits) said:

30 July 2007
..and if not, at least have the grandparents gift the funds to the parents, instead of paying the school directly, so that the parents can make the payments and claim the deduction.

Kevinh5 (talk|edits) said:

30 July 2007
but consider also the gift tax rules.

Bobw12 (talk|edits) said:

1 August 2007
Actually no, the child is not a dependent of the grandparents. I guess that would rule out the schedule A option. I was thinking along the gift lines also. Would a check for half to each parent make sense?

Kevinh5 (talk|edits) said:

1 August 2007
a check written directly to the educational institution would not be a taxable gift, but a gift to the parents, from which they paid the tuition, would qualify the parents for the deduction. So it depends on what the grandparents want to do: give as much away as possible without gift tax, or help the parents of the child.

Taxref (talk|edits) said:

1 August 2007
The gift to the parents would probably be the best option tax-wise, due to the Schedule A deduction for the parents. Each grandparent could gift each parent up to $12K (for a total of up to $48K)without exceeding the annual reportable gift floor.

Death&Taxes (talk|edits) said:

1 August 2007
I agree with the Ref, but with the qualification that parents are not in AMT, when full benefit might not be allowed. Also people in flat tax states like PA realize no state tax savings. Run the numbers.

Bobw12 (talk|edits) said:

13 September 2007
Should a return containing this deduction (large amount) be paper filed with a copy of the School's letter? I think efiling the return might raise a flag??

Natalie (talk|edits) said:

September 13, 2007
If the grandparents are going to gift the money to the parents, is it possible to run the payments through a Sec. 125 plan? That way they wouldn't need to worry about AMT issues or large Sched. A deductions. Of course, you'd want to make sure they could get the benefit of putting most of the deduction through the plan. Or maybe they could do a combination of the Sec. 125 (up to the maximum amount) and then write off the rest?

JR1 (talk|edits) said:

September 13, 2007
No flags, Bob. Don't worry, it's merely a medical deduction. Had something similar with my son who had LD, and went thru a program that had the letter qualifying it as medical. I efiled only so that it would breeze thru. You don't want to get into some debate with one of TxSrv's friends who aren't as smart or experienced about whether it qualifies or not. Efile is under the radar.

JAD (talk|edits) said:

13 September 2007
Do you know off the top if after school tutoring is deductible if the kid is LD?

Death&Taxes (talk|edits) said:

13 September 2007
I think a reading of the PLR can give clues:

1. "Thus, 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."

2."Overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided."

Here I would substitute 'after school tutoring' for 'attending the school.'

3. "You requested a ruling that School X is a “special school” tuition at which is deductible, but this is not the standard under section 1.213-1(e)(1)(v)(a). Deductibility of tuition depends on exactly what the school provides an individual because a school can have a normal education program for most students, and a special education program for those who need it. Thus, a school can be “special” for one student but not for another.

"Based on your representations, we conclude that Child A and Child B are attending School X principally to receive medical care in the form of special education in those years each child is diagnosed as having a medical condition that handicaps that child’s ability to learn."

Sorry to recopy what is above, but it seems to me the ruling boils the deductibility down to a nub. So I believe it will come down to 'exactly' what the tutor provides.

JR1 (talk|edits) said:

September 13, 2007
And why.

Death&Taxes (talk|edits) said:

13 September 2007
That 'what' comes from the tutor and the 'why' comes from the doctor....that says it simply.

JAD (talk|edits) said:

14 September 2007
Thank you both for your thoughts.

Riley2 (talk|edits) said:

14 September 2007
A payment by the grandparents directly to the school would not be deductible by anyone; however, such payments would be exempt from gift taxes.

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