Magazine article The Exceptional Parent

Annual Income Tax Guide

Magazine article The Exceptional Parent

Annual Income Tax Guide

Article excerpt

That time of year is upon us once again - the 1992 tax season. Just the thought of filing those intimidating returns strikes fear into the hearts of many parents. Tax forms are difficult enough for the average family, but for parents of a child with a disability, the process can be even more frustrating and time consuming. This article will help guide you through the often confusing maze of new legislation, tax rules and tax credits.

What does this mean to you, the panicked parent? Relax. There were not many new rulings this year on disability issues, so there are few changes to worry about.

Medical Deductions

The first thing to determine is whether or not it is worthwhile for you to claim medical deductions. Medical expenditures are only deductible if they total more than 7.5 percent of your adjusted gross income. In other words, if your medical expenses total less than 7.5 percent of your income, it is unnecessary to file medical deductions.

If your income is low enough that little tax is paid on it, however, there is no need to file medical deductions as a means of saving taxes. Be sure to reduce your medical expenses by the total reimbursements you have received, including insurance compensation and payments made directly to doctors and hospitals.

Claiming medical deduction requires a considerable amount of effort and organization. The IRS processes tax returns by a computer that automatically singles out a taxpayer with high deductions. Since parents of a child with a disability generally fall into this category, they have a greater risk of being audited. Proper documentation is necessary, so keep receipts, prescriptions and any other expense records related to your child's disability.

Besides assisting you in the event of an audit, organized records will help you fill out your return correctly. It is important to remember that the IRS can audit your tax return for up to seven years after the return is filed, so keep records from the last seven years in a safe place.

One way to reduce the chance of a future audit is to enclose a letter with your return explaining your child's disability and another letter from your child's physician describing the nature of the disability and the prescribed care.

Many medical expenses may not be deductible or covered by insurance, but there are some deductible expenses you may not have thought to take. This article will discuss a few of the allowable medical deductions. For a complete, detailed list, see IRS publication #502, Medical and Dental Expenses. The law provides a limited deduction for the following expenditures under the category of "medical care":

* Prescription drugs and insulin.

* Medical insurance premiums and certain medical transportation costs, such as bus or taxi fares or car/gas expenses (at a rate of 9] per mile) to receive care.

* Lodging for a person receiving medical care away from home (and for an accompanying parent or guardian if the person receiving care is unable to travel alone), limited to $50 per person per day, plus the cost of meals, as long as they are furnished by a hospital or similar institution.

* Modifying a vehicle with a wheelchair lift.

* Adapting a home to the needs of a child with a disability, such as installing hand railings, support bars and entrance and exit ramps; modifying a bathroom; widening doorways or hallways; adjusting kitchen cabinets, electrical outlets, fixtures, stairs and hardware on doors; installing lifts; and grading the ground in order to provide access to the home.

These modifications are fully deductible because they do not increase the value of the home. Other "medically necessary" adaptations, such as the installation of an elevator, swimming pool, air filter, humidifier or air conditioner, may increase property value. If they do, you can only deduct the difference between the cost of the improvements and the property value increase. …

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