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10 Tax Tips for Families with Special Needs

This article was originally published on Special Needs Resources Foundation of San Diego

As if tax season isn’t already an overwhelming task for families caring for loved ones with special needs, 2020 ushered in a unique set of changes and challenges. To help lend clarity to the chaos, consider the following tax tips and consult a tax professional. Hopefully, these resources will help simplify the process.

Impairment-Related Work Expenses: If your loved one with special needs has work-related expenses, be sure to keep a record of them. They can play an important role in reducing taxable income. The IRS allows a deduction for Impairment-Related Work Expenses (IRWE) like transportation to and from work, medicine, medical supplies, medical devices and service animals. These work expenses can be significant, not only by reducing your tax bill, but also by helping a person with a disability maintain eligibility to receive Supplemental Security Income (SSI). For more information on IRWE, click here.   

Medical and Dental Expenses: Gather your unreimbursed medical and dental bills. Anything doctor-prescribed may qualify as a deduction. Expenses that exceed 7.5 percent of your Adjusted Gross Income (AGI) are deductible. This TurboTax article discusses how the deduction works. AGI is your gross income minus adjustments to income, such as student loan interest, alimony payments and contributions to a retirement account.

Dependent Considerations: If you are paying for more than half of the support of your adult child or elder parent, you may be able to claim that person as a dependent.

Child and Dependent Care Credit: Take note of the dependent care credit. This is an actual credit—not a deduction—that may allow you to claim up to $3,000 for one person, or $6,000 for two or more people. Details on the dependent care credit from the IRS can be found here. If you are paying someone to look after your children or another person in your home while you work, you may be eligible for this credit. TurboTax provides an explanation of what qualifies here.

Conference Registration Fees: If you paid any medical conference registration fees to learn more about your loved one’s disability, those expenses can be deducted as a medical expense.

Unemployment Benefits: If you collected unemployment last year, those benefits must be included in your federal gross income. Check whether you had tax withholdings made from the checks or made estimated payments. Some states don’t tax unemployment income, so check the rules in your state.

Earned Income Tax Credit: You may qualify for the Earned Income Tax Credit, which provides a credit between $538–$6,660, depending on the number of qualifying children you have, your tax filing status (e.g., single, married filing jointly, etc.) and how much you earned, less adjustments. More information on the Earned Income Tax Credit from the IRS can be found here.

Savers Credit: Be sure to check your eligibility for the Savers Credit, which can provide up to a $1,000 tax credit (or $2,000 for a married couple filing a joint return). 

Charitable Donations: If you donated money to a charitable organization, you can take a $300 deduction, even if you don’t itemize your deductions.

Stimulus Checks: If your income was down last year (from the year before), consider filing your taxes as soon as possible. Stimulus checks are based on whatever the IRS has on file for you when the check is issued.

Be sure that you—with the assistance of a tax professional and investment advisor—are taking full advantage of these opportunities.

Jeff Vistica, wealth advisor

Jeff Vistica, CFP®, ChSNC®, AIF®

Jeff is the co-founding partner of Valiant Partners, a registered investment advisory firm located in Carlsbad, Calif. Valiant Partners devotes its practice exclusively to serving the needs of parents with special needs children.