Dyslexia Program Tuition Was a Deductible Medical Expense

In Letter Ruling 200521003, the Service held that tuition payments made to a school with a program enabling dyslexic children to deal with their condition, qualified as a Sec. 213(a) deductible medical expense. The ruling widensever so slightlythe definition of the kinds of payments that qualify as deductible medical expenses. Taxpayers and tax advisers should, however, be aware of the rulings inherent limits and be prepared to address the other rules that limit the deduction.

Background

In the ruling, the taxpayers two children were both diagnosed with disabilities caused by medical conditions, including dyslexia, which handicapped their ability to learn. The taxpayers enrolled the children in a school that provided each with special education designed to enable them to deal with their medical handicaps.

Ruling

The IRS first explained that normal education is not medical care, because it is not designed to overcome a medical disability. For education to be medical care, a physician or other qualified professional must diagnose a medical condition requiring special education to correct it. Although a school need not employ doctors, it must have professional staff competent to design and supervise a curriculum providing such care. Finally, overcoming the disability must be a principal reason for attending the school; any ordinary education received must be incidental to the special education provided.

The IRS ruled that the children were attending the school principally to receive medical care in the form of special education in those years they were diagnosed as having a medical condition that handicapped their ability to learn. Thus, the tuition could be claimed as a Sec. 213(a) medical expense for the years the children continue to be diagnosed as medically handicapped. Citing Rev. Rul. 69-607, the Service further held that dyslexia could be sufficiently severe as to be such a handicap.

Analysis

This ruling expands the types of tuition payments that may be deductible as medical expenses. It refutes the presumption that educational institutions must be special schools for their tuition to be deductible. The ruling confirms that tuition for institutions with programs designed to enable dependents to deal with a diagnosed medical handicaplike dyslexiawill qualify as a Sec. 213(a) deduction, as long as other requirements are met.

Inherent Limits

Before taxpayers claim the full amount of private school tuition as a deduction, however, there are other requirements in Letter Ruling 200521003 that must be met:

1. A principal purpose for attending the institution must be medical care;

2. The institutions program must be designed and administered by qualified professionals for the purposes of treating the dependents medical condition; and

3. Ordinary education must be incidental.

For example, a dependent child is blind and attends a school established for the purposes of teaching the blind to read Braille. Under the ruling, a taxpayer would clearly be entitled to claim a deduction for such tuition payments. However, if a childs medical condition is attention deficit hyperactivity disorder (ADHD) and, although diagnosed by a doctor, the child attends a school for the musically talentedwith only a general program to address the challenges of ADHDchances are the IRS will challenge the tuitions deductibility. Further, letter rulings are not precedential and apply only to the specific facts presented in the request, although they do indicate the Services thinking.

Other Restrictions

Finally, medical expenses are subject to a strict percentage limit; they are deductible only to the extent they exceed 7.5% of adjusted gross income. Fortunately, however, unlike certain other deductions claimed on an individuals return, medical deductions are not subject to phaseout.

For more discussion, see Gibson, Tax Clinic, Are Special School Expenses a Medical Deduction?, TTA, August 2003.

From Kirk Sinclair, J.D., Holtz Rubenstein Reminick LLP, Melville, NY