Deducting the Cost of Diapers and other Services for your Child with a Disability

Stepnowski Law Library

The Law Office of Edward L. Stepnowski
The Office of Frank E. Stepnowski Law, PC

Please do not use this article as definitive advice, as your situation may vary. Consult your attorney or tax professional. Nothing on this page creates an attorney-client relationship.

discussed on this page:

diapers or incontinence supplies

anesthesia during dentistry

special foods

service dogs

personal care items

orthotics parity

Personal Support Workers

Deducting Incontinence Supplies

Someone asked the question if she could deduct on her taxes the cost of diapers used by her child with a disability. Great question! Having a child with disabilities puts great strain on your budget, and every bit of savings helps.

There is no definitive answer yet, but an analysis of IRS documents implies that the cost can be deducted if your child is disabled and above the age when a child without a disability would no longer use them.

Ordinarily, diapers, known as incontinence supplies, are not deductible as a medical deduction to your taxes, and in fact the primary government documents specifically exclude them. However, this does not end our search for the answer.

The best place to look for information on how to deduct medical expenses is IRS Publication 502.
Links to Pub 502, the tax code and regulations are on the tax reference page.

Publication 502 supplies the general rules:

Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. They also include dental expenses.

Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.

It also describes those that are not deductible:

You cannot include in medical expenses the cost of an item ordinarily used for personal, living, or family purposes unless it is used primarily to prevent or alleviate a physical or mental defect or illness. For example, the cost of a toothbrush and toothpaste is a nondeductible personal expense.

Where an item purchased in a special form primarily to alleviate a physical defect is one that in normal form is ordinarily used for personal, living, or family purposes, the excess of the cost of the special form over the cost of the normal form is a medical expense

In particular IRS Pub 502 states:

You cannot include in medical expenses the amount you pay for diapers or diaper services, unless they are needed to relieve the effects of a particular disease.

This statement seems to apply the general rules above. Also, the statement is based on IRS Revenue Ruling 55-261, which states:

"16. Maternity clothing, antiseptic diaper service, wigs, toothpaste .-Amounts expended for the preservation of general health or for the alleviation of physical or mental discomfort which is unrelated to some particular disease or defect are not expenses for medical care as defined in section 23(x) of the Code. [Step-Law note: Now sec. 213.] Expenditures for maternity clothing, antiseptic diaper service, wigs, and toothpaste, are held to be personal expenses, the deduction of which is prohibited by section 24(a)(1) of the Code. O. G. Russell v. Commissioner , Tax Court Memorandum Opinion, entered November 6, 1953."

So far, IRS Pub 502 accurately states the law for most people. Our sons and daughters, however, are not like most people. Diapers are ordinary personal costs of most babies, and for them not deductible. The key here is the "unless." The real question here is whether diapers count for the exception: "they are needed to relieve the effects of a particular disease."

The answer is that such devices may be deductible, but there is no controlling precedent.

In 1981, the Tax Commissioner issued a Private Letter Ruling discussing Code Section 213. As opposed to court rulings which have precedential authority, a letter ruling is directed only to the taxpayer who requested it and is not precedential. However, the letter provides guidance on how the IRS has considered the issue in the past.

In PLR 8137085: the commissioner noted the following facts:

the taxpayer's daughter suffered from Aicardi syndrome, which resulted in brain damage,

she was completely incontinent,

she was "long past the age when diapers would be a normal living expense" (she was 4 years old).

"her physician stated that should require diapers

on a constant basis because of her neurological disease,

and because of her size and skin breakdown potential, absorbent paper product diapers should be used."

The IRS concluded:

"Because disposable diapers are used to alleviate the effects of a particular disease, ... we hold that the cost of disposable diapers is a cost of the medical care of your daughter and is deductible under section 213 of the Code."

If your child has the above effects, the IRS should rule similarly. It should apply to any neurologic disorder which results in incontinence, not just the syndrome listed above. They help alleviate the effects of a particular disease.

In 2009, the IRS issued another letter which stated that items which have no other purpose other than to treat the effects of a disease, such as for incontinence, would likely be deductible. See the OTC letter.

However, no medical expenses are deductible unless you meet two other requirements:

Your itemized deductions exceed the "standard deduction" (easy to do if you have a mortgage and pay real estate and State income taxes.) The standard deduction is about $9,700 for married couples, less for singles.

Your family's total, unreimbursed medical expenses exceed 7.5% of your adjusted gross income (usually hard, but can be met if your child has medical treatments insurance will not pay, such as ABA or other treatments). (In 2013 the threshold was increased to 10%.) This threshold is described in the tax reference page: MedicalDed.html

Remember that the law is always changing and you should consult a tax professional.

Insurance Coverage for anesthesia in dental care

This law of the State of Illinois requires health insurance companies to cover anesthesia and ancillary costs of providing dental care to a patient with disabilities when performed in a hospital or outpatient center. This section does not apply to Medicare, Medicaid, or similar government plans and may be limited by ERISA, which applies to most business employee plans.

New for 2015: Illinois passed Public Act 99-141 in 2015, which expands the anesthesia mandate to a dental office, oral surgeon's office, hospital, or ambulatory surgical treatment center if the individual is under the age of 19 and has been diagnosed with an autism spectrum disorder or developmental disability. This law will apply to insurance policies taking effect next year, usually January 1, 2016.

The Text of the Insurance Code Section from P.A. 92-764) (215 ILCS 5/356z.2) is:

Sec. 356z.2. Coverage for adjunctive services in dental care.

(a) An individual or group policy of accident and health insurance amended, delivered, issued, or renewed ... shall cover charges incurred, and anesthetics provided, in conjunction with dental care that is provided to a covered individual in a hospital or an ambulatory surgical treatment center if any of the following applies:

(1) the individual is a child age 6 or under;
(2) the individual has a medical condition that requires hospitalization or general anesthesia for dental care; or
(3) the individual is disabled.*

New (a-5) An individual or group policy of accident and health insurance amended, delivered, issued, or renewed after the effective date of this amendatory Act of the 99th General Assembly shall cover charges incurred, and anesthetics provided by a dentist with a permit provided under Section 8.1 of the Illinois Dental Practice Act, in conjunction with dental care that is provided to a covered individual in a dental office, oral surgeon's office, hospital, or ambulatory surgical treatment center if the individual is under age 19 and has been diagnosed with an autism spectrum disorder as defined in Section 10 of the Autism Spectrum Disorders Reporting Act or a developmental disability. A covered individual shall be required to make 2 visits to the dental care provider prior to accessing other coverage under this subsection. For purposes of this subsection, "developmental disability" means a disability that is attributable to an intellectual disability or a related condition, if the related condition meets all of the following conditions:

(1) it is attributable to cerebral palsy, epilepsy, or any other condition, other than mental illness, found to be closely related to an intellectual disability because that condition results in impairment of general intellectual functioning or adaptive behavior similar to that of individuals with an intellectual disability and requires treatment or services similar to those required for those individuals; for purposes of this definition, autism is considered a related condition;
(2) it is manifested before the individual reaches age 22;
(3) it is likely to continue indefinitely; and
(4) it results in substantial functional limitations in 3 or more of the following areas of major life activity: self-care, language, learning, mobility, self-direction, and capacity for independent living.

(b) For purposes of this Section, "ambulatory surgical treatment center" has the meaning given to that term in Section 3 of the Ambulatory Surgical Treatment Center Act.
    *For purposes of this Section, "disabled" means a person, regardless of age, with a chronic disability if the chronic disability meets all of the following conditions:
        (1) It is attributable to a mental or physical impairment or combination of mental and physical impairments.
        (2) It is likely to continue.
        (3) It results in substantial functional limitations in one or more of the following areas of major life activity:
            (A) self-care;
            (B) receptive and expressive language;
            (C) learning;
            (D) mobility;
            (E) capacity for independent living; or
            (F) economic self-sufficiency.

(c) The coverage required under this Section may be subject to any limitations, exclusions, or cost-sharing provisions that apply generally under the insurance policy.

(d) This Section does not apply to a policy that covers only dental care.

(e) Nothing in this Section requires that the dental services be covered.

(f) The provisions of this Section do not apply to short-term travel, accident-only, limited, or specified disease policies, nor to policies or contracts designed for issuance to persons eligible for coverage under Title XVIII of the Social Security Act, known as Medicare, or any other similar coverage under State or federal governmental plans.

(Source: P.A. 92-764, eff. 1/ 1 /2003.)

(210 ILCS 5/3) (from former Ill. Rev. Stat. Ch. 111 1/2, par. 157-8.3)

Sec. 3. As used in this Act, unless the context otherwise requires, the following words and phrases shall have the meanings ascribed to them:
(A) "Ambulatory surgical treatment center" means any institution, place or building devoted primarily to the maintenance and operation of facilities for the performance of surgical procedures or any facility in which a medical or surgical procedure is utilized to terminate a pregnancy, irrespective of whether the facility is devoted primarily to this purpose. Such facility shall not provide beds or other accommodations for the overnight stay of patients; however, facilities devoted exclusively to the treatment of children may provide accommodations and beds for their patients for up to 23 hours following admission. Individual patients shall be discharged in an ambulatory condition without danger to the continued well being of the patients or shall be transferred to a hospital.

    The term "ambulatory surgical treatment center" does not include any of the following:
        (1) Any institution, place, building or agency required to be licensed pursuant to the "Hospital Licensing Act", approved July 1, 1953, as amended.
        (2) Any person or institution required to be licensed pursuant to the "Nursing Home Care Act", approved August 23, 1979, as amended.
         (3) Hospitals or ambulatory surgical treatment centers maintained by the State or any department or agency thereof, where such department or agency has authority under law to establish and enforce standards for the hospitals or ambulatory surgical treatment centers under its management and control.
         (4) Hospitals or ambulatory surgical treatment centers maintained by the Federal Government or agencies thereof.
         (5) Any place, agency, clinic, or practice, public or private, whether organized for profit or not, devoted exclusively to the performance of dental or oral surgical procedures.

P.A. 92-764 also specified that the above dental mandate also applied to State Employees Group Insurance, Voluntary Health Services Plans and HMOs.

Dietary Foods - May Be Deductible.

New: IRS rules special foods can be partially deductible.

"The excess cost of specially prepared foods designed to treat a medical condition over the cost of ordinary foods which would have been consumed but for the condition is an expense for medical care," the IRS wrote in 2011-0035. "If a taxpayer can establish the medical purpose of the diet, such as through a physician’s diagnosis, then to the extent the cost of the food for the special diet exceeds the cost of the food that satisfies a taxpayer’s normal nutritional needs if the special diet were not required, the excess cost is an expense for medical care under section 213(d)."

IRS Publication 502 uses this test:
You can include the cost of special food in medical expenses only if:

The food does not satisfy normal nutritional needs,
The food alleviates or treats an illness, and
The need for the food is substantiated by a physician.

This advise clarifies the previous information in the 09/28/2007 IRS information letter ( http://www.irs.ustreas.gov/pub/irs-wd/07-0037.pdf) which explained that diet foods, meal replacements, and dietary supplements to help people reduce their weight do not qualify as medical care expenses under Code Section 213(d). The IRS letter notes that expenses must be for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting a structure or function of the body in order to qualify as Code Section 213(d) medical care expenses. In contrast, diet foods, meal replacements, an dietary supplements are substitutes for the food that individuals normally consume to satisfy their nutritional requirements and are nondeductible personal expenses. The letter references Revenue Ruling 2002-19, holding that even though obesity was considered to be a disease, reduced-calorie diet foods were not medical care expenses under IRC Section 213(d), even when purchased by individuals diagnosed with obesity..

In 2009, the IRS repeated this advice in the OTC letter in which it stated that items which have no other purpose other than to treat a disease or illness qualify as medical expenses even though not prescription drugs. Thus treatments for acne, incontinence, arthritis, constipation, colds and sinus conditions, dehydration, indigestion, braces and orthotics for weaken body parts most likely qualify as deductible medical expenses. Wheelchair cushions may be considered a necessary accessory.

However, previous IRS guidance states that, in special cases, depending upon the particular facts presented, if the prescribed food or beverage is taken solely for the alleviation or treatment of an illness, is in no way a part of the nutritional needs of the patient, and a statement as to the particular facts and to the food or beverage prescribed is submitted by a physician, the cost of such food or beverage may be deducted as a medical expense. Where the special food or beverage is taken as a substitute for food or beverage normally consumed by a person and satisfies his nutritional requirements, the expense incurred is a personal expense; but where it is prescribed by a physician for medicinal purposes and is in addition to the normal diet of the patient, the cost may qualify as a medicinal expense, based on IRS Revenue Ruling 55-261,

Document your costs:

In a case involving Crohn's disease, the court ruled that ordinary substitute food is not deductible. The court was not convinced that his diet, although followed for medical reasons, differed from the diet of an ordinarily health conscious individual. The court rejected taxpayers’ claims for deductions for special foods which were found to be merely substitutes for foods normally consumed by an individual. Massa v. Commissioner, T.C. Memo 1999-63, aff’d without published opinion, 208 F.3d 226 (10th Cir. 2000). However, the ruling may have been different had the taxpayer submitted more evidence from his doctor and the actual costs by which his actual food expenditures exceeded the costs of a normal diet. Petitioner testified that he deducted 66 percent of his total food expenditures for 1992 as medical expenses but submitted little evidence of the cost, quantity, or type of foods and supplements which he purchased.

Lorenzo's Oil, probably meets the test.

Gluten-free foods thus may be partially deductible. Since these foods cost more than regular versions, the amount of the excess may be deductible if the three-part test above is met. Also, as described in the previous page, the taxpayer must itemize and the medical expense meet the 10% of of income threshold.

Infant formula held not deductible.

In a private letter ruling, PLR-102915-09, the IRS concluded that infant formula for the healthy baby of a woman who could not breastfeed due to a double mastectomy was not a medical care expense under Code Section 213(d). Because the baby in this ruling was healthy and the infant formula satisfied the baby's normal nutritional needs, the IRS concluded that the formula should be viewed as food that the baby would normally consume and not as a medical care expense. (July 1, 2009)

http://www.irs.gov/pub/irs-wd/0941003.pdf

New: IRS says breast pumps tax deductible expense

The cost of breast pumps will now be considered tax-deductible medical expenses under a ruling issued by the Internal Revenue Service in February.

The ruling, long sought by advocates, means that women will be able to use money set aside in pretax spending accounts to buy the pumps and related equipment, which can cost several hundred dollars. For women without flexible spending accounts, the cost of pumps will be tax deductible if their total medical costs exceed 7.5 percent of adjusted gross income.

Previously, the IRS considered breast pumps to be feeding equipment, not medical devices. However, the American Academy of Pediatrics argued that breastfeeding has many medical benefits for both mother and baby. Advocates hope that making breast pumps more affordable will enable more women to breastfeed longer.

Service Dogs Tax Deduction now extends to those with mental disabilities too.

Service dogs are invaluable aids to many people with disabilities, but is the cost of the dog deductible?

IRS Publication 502 gives the answer that service dog expenses are tax deductible:

"You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal to assist a visually-impaired or hearing-impaired person, or a person with other physical disabilities."

Tax law does require that the expense must be for a mitigation related to the diagnosed medical condition and not merely the general health of an individual.

If you are visually impaired and have dog to guide you, then your expense is proven. However, the IRS explanation above discusses “physical” disabilities, rather than mental disabilities. This definition left those with mental disabilities in a gray area. But if your doctor prescribes the animal and links it to a specific disabling mental condition, the IRS would probably accept it. The general rule for deducting a medical expense is "Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation."

Recently, the IRS removed the doubt about service dogs for those with mental disabilities when the IRS sent a letter to Congress.

A taxpayer who claims that an expense of a peculiarly personal nature is primarily for
medical care must establish that fact. The courts have looked toward objective factors
to determine whether an otherwise personal expense is for medical care: the taxpayer’s
motive or purpose for making the expenditure, whether a physician has diagnosed a
medical condition and recommended the item as treatment or mitigation, linkage
between the treatment and the illness, treatment effectiveness, and proximity in time to
the onset or recurrence of a disease. Havey v. Commissioner, 12 T.C. 409 (1949). The
taxpayer also must establish that the expense would not have been paid “but for” the
disease or illness. A personal expense is not deductible as medical care if the taxpayer
would have paid the expense even in the absence of a medical condition.
Commissioner v. Jacobs, 62 T.C. 813 (1974).
The costs of buying, training, and maintaining a service animal to assist an individual
with mental disabilities may qualify as medical care if the taxpayer can establish that the
taxpayer is using the service animal primarily for medical care to alleviate a mental
defect or illness and that the taxpayer would not have paid the expenses but for the
disease or illness.
(Letter to Rep. Tanner, Index Number: 213.00-00, 06/25/2010.)

Following the rules listed in this letter should enable you to prove the deduction.

Another possibility is that if you have a service dog to help with a mental disability, you may be able to claim the animal under “impairment-related work expenses.” The work deduction is less limited than the medical deduction if it qualifies, but for you to be considered disabled so as to claim an impairment-related work expense, you must have a physical or mental disability that functionally limits your being employed, or a physical or mental impairment that substantially limits one or more of your major life activities such as performing manual tasks, walking, speaking, breathing, learning, or working.

Note that the new ADA regulations which became effective March 2011 define service dog:

Any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability. Other species of animals, whether wild or domestic, trained or untrained, are not service animals for the purposes of this definition. The work or tasks performed by a service animal must be directly related to the handler´s disability. Examples of work or tasks include, but are not limited to, assisting individuals who are blind or have low vision with navigation and other tasks, alerting individuals who are deaf or hard of hearing to the presence of people or sounds, providing non-violent protection or rescue work, pulling a wheelchair, assisting an individual during a seizure, alerting individuals to the presence of allergens, retrieving items such as medicine or the telephone, providing physical support and assistance with balance and stability to individuals with mobility disabilities, and helping persons with psychiatric and neurological disabilities by preventing or interrupting impulsive or destructive behaviors. The crime deterrent effects of an animal´s presence and the provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks for the purposes of this definition.

Dogs may also qualify under IDEA, the Individuals with Disabilities Education Act.

Update, February 25, 2017:

The U.S. Supreme Court on Wednesday ruled that the family of a Michigan girl with cerebral palsy can pursue a disabilities suit against her school for banning her service dog, in Fry v. Napoleon Community Schools.

Based on the lawsuit allegations, the family was not required to exhaust administrative remedies under the Individuals with Disabilities Education Act before suing.

The Elementary School had banned the service dog, a goldendoodle named Wonder, in 2009, though it later relented. The school district had reasoned that Wonder didn’t need to help the girl, identified as E.F., because she already had a human aide. Wonder was trained to help E.F. retrieve dropped items, open and close doors, turn on and off lights, and take off her coat. E.F.’s pediatrician had recommended the dog stay with E.F. at all times to increase bonding.

The family’s suit against the school district suit relied on the Americans with Disabilities Act and the Rehabilitation Act, rather than the IDEA law.

The court said exhaustion wasn’t necessary because the substance of the suit wasn’t based on a denial of the IDEA law’s guarantee of a free appropriate education. She remanded the suit, however, for a determination whether the family had sought remedies under the IDEA law before filing the suit.

New: more details on Service animals: ADA and Service Animals- StepnowskiLaw.html

IRS issues guidance on deducting personal care items as medical expenses

The IRS deems "medical care" expenses as the amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting a structure or function of the body. Section 213 of the Internal Revenue Code ordinarily allows the deduction of drugs and equipment prescribed by physicians. Medical care expenses are limited to expenses paid primarily for the prevention or alleviation of a physical or mental defect or illness. Rules for flexible spending accounts need more analysis than other types of plans.

An expense which is merely beneficial to general health is a personal expense and not deductible. A question often arises when an item can be both. The IRS will look to these factors to determine whether a dual-purpose item (i.e., one that could be used for personal as well as medical reasons) is primarily for medical care, including:

the motivation or purpose for making the expenditure,

whether a physician has recommended the item to treat or mitigate a diagnosed medical condition,

linkage between the treatment and the condition,

proximity in time to the condition’s onset or recurrence,

and most importantly, the expense would not have been paid "but for" the disease or illness.

Thus treatments for acne, incontinence, arthritis, constipation, colds and sinus conditions, dehydration, indigestion, braces and 
orthotics  for weaken body parts most likely qualify as deductible  medical expenses.  Wheelchair cushions may be considered a necessary 
accessory.

See the OTC letter.

Illinois Orthotics Insurance Parity law

Section 356z.18 of the Illinois Insurance Code(215 ILCS 5/356z.18) now requires health plans to cover orthotics, or customized orthotic devices, under terms and conditions that are no less favorable than the terms and conditions that apply to substantially all medical and surgical benefits provided under the plan or coverage. Repairs and replacements of prosthetic and orthotic devices are also covered, subject to the co-payments and deductibles, unless necessitated by misuse or loss. The law applies only to general plans, and may be preempted by ERISA, which applies to most business plans, and does not apply to special type policies or government plans.

Personal Support Workers Exemption from Income

Parents who are the personal support workers for their sons or daughters in the Illinois Home-Based Services program and similar programs, which are funded under Medicaid waivers, may exclude that income from their income tax. This part of the article does not discuss a medical deduction, but concerns income.

On January 3, 2014, the Internal Revenue Service (IRS) issued Notice 2014-7, 2014-4 I.R.B. 445. This Notice 2014-7 allowed the tax-free treatment for income received by caregivers in the home under a State Medicaid Home and Community-Based Services waiver program The programs are established in section 1915(c) of the Social Security Act and are commonly called the Medicaid Waiver payments. Section 1915(c) enables individuals who otherwise would require care in a hospital, nursing facility, or intermediate care facility to receive care in the individual care provider’s home. The notice provides that the Service will treat these Medicaid waiver payments as "difficulty of care" payments and thus excludable from gross income under § 131 of the Internal Revenue Code. The care must be in “the provider’s home” meaning the place where the provider resides and regularly performs the routines of the provider’s private life, such as shared meals and holidays with family. The disabled person may be a child, a parent or unrelated.

Parents who had taxes withheld during 2014 for this waiver program may seek a refund when they file their tax returns.
If they paid taxes in previous years, they can file amended returns for the three previous years and seek refunds for the taxes on that income.
Parents should ask their agency to designate them as exempt from withholding.
FICA, social security, and Medicare taxes are not excluded from withholding unless the care recipient is your employer and a domestic service exception applies.

The IRS has issued new FAQ to explain the process:
http://www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-Excludable-From-Income

IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.