Behavioral problems, medical expense deduction?

Do you have a child with behavioral issues? Did you know that expenses for the treatment as well as tuition for boarding schools may qualify as a medical expense?

According to IRC Section 213, expenses paid for medical care of the taxpayer, spouse or a dependent may be allowed as a deduction. The Code gives us their definition of “medical care” which includes the diagnosis, cure, mitigation, treatment, or prevention of disease. Keep in mind that in order to deduct medical expenses, you must itemize deductions under Schedule A. The medical expenses must also exceed 10 percent of your adjusted gross income.

There have been many cases where taxpayers have taken medical expense deductions for boarding schools and camps that aid in the treatment of mental health issues. One example of this is the Tax Court case Lawrence D. Greisdorf, 54 TC 1684, 08/31/1970. In this case, Mr. Greisdorf had a step-daughter who developed mental health issues after her birth fathers passing. She was seen by a psychiatrist which after 12 sessions, was diagnosed with “Pre-adolescent Adjustment Reaction.” It was recommended by the psychiatrist to attend the Mills School for further improvement. The Tax Court determined that the Mills school qualified as a “special school” under Treas. Reg. §1.213-1(e)(1)(v). The Tax Court held that the cost of tuition qualified as a medical expense. This was because the schools primary purpose was medical care and education was incidental to the special services furnished by the school.

An establishment is said to qualify as a “special school” so long as it is regularly engaged in providing medical care. This means that if a school’s primary purpose is for the treatment of mental care and schooling is a necessary incident, the full amount of tuition would qualify as a medical expense. This would also include camps which have the primary purpose of medical care.

The Tax Court Memo Charles F. Urbauer, TC Memo 1992-170., involves a similar fact pattern to the previous Lawrence D. Greisdorf case. In this Memo, the taxpayers sent their son who had severe behavioral problems as a result of habitual drug use to the DeSisto School for the treatment of those problems.  The Tax Court determined that the DeSisto School qualified as a “special school” and allowed the expenses relating to tuition as well as room and board to be deducted as medical expenses. As part of DeSisto’s rehabilitation program, it was required for the parents to attend therapy sessions on campus. The therapy sessions were considered to be integral to the son’s recovery and failure to attend would prompt the dismissal of the son from the program. In attending the therapy sessions, the taxpayers incurred airfare as well as rental car expenses.  It was held by the court that the airfare and rental expenses were primarily to attend the therapy sessions and they were deductible as a medical transportation expense.

Based on the analysis above, if a camp or boarding school qualifies a “special school”, you may be able to deduct the tuition as well as room and board as a medical expense. Even travel to the school would qualify as medical expense as long as the primary reason for travel is related to medical care or required by a program.

Please contact us for more information or to see if you qualify for the medical expense.

By: Jose Palafox, Staff Accountant, Onisko & Scholz