If you have children in college, we don’t have to tell you that it usually costs a pretty penny to attend school these days. At least, you may be able to claim one of two higher education credits for qualified expenses, although these tax benefits are phased out for upper-income taxpayers.
Tax consolation: Part of the tuition payment you make for a child may be deductible as a medical expense if you itemize deductions on your personal tax return. This might put you over the top of the threshold for a deduction or increase an existing write-off.
First, let’s start with some background information. Under current law, you can deduct unreimbursed medical expenses above 7.5% of your adjusted gross income (AGI), down from 10% of AGI, if you itemize deductions. The medical expense deduction threshold had see-sawed back and forth for several years between 10% and 7.5% of AGI, but recent legislation made the lower threshold a permanent part of the tax code, beginning in 2021.
Nevertheless, this deduction threshold is still imposing for most taxpayers. For example, if you have an annual AGI of $100,000 and incur $8,500 in qualified medical expenses, your deduction is limited to just $1,000. If you have $7,000 in qualified medical expenses, you get no deduction
Thus, you should scour your records for every deductible medical expense that can boost your prospects for a deduction. The list of qualified expenses may be more extensive than you think. For example, you may be able to count a portion of the tuition payment you make for a child’s higher education.
Specifically, the IRS says in Pub. 502 (Medical and Dental Expenses) that you can include in your deductible amount charges for a health insurance plan included in a lump-sum tuition fee if the charges are separately stated or can easily be obtained from the school.
Practical idea: Request a breakdown of expenses, in writing, from the college or university your child attends. This may provide proof that is needed to support a claim that a portion of the tuition is deductible as a medical expense.
In addition, be aware costs associated with a child attending a special school may qualify for the medical expense deduction. Notably, the IRS recently ruled that tuition paid for a special school designed to help students manage or overcome disabilities could be counted as a deductible medical expense if the child’s primary reason for attending the school is for medical purposes. To qualify, the use of the special schooling must be recommended by the child’s physician.
Bottom line: Don’t give up on a medical expense deduction so easily. Some expenses you have overlooked, such as the portion of tuition attributable to health insurance, may make a difference.