Flexible Spending Account-eligible expense: Special education

Can an FSA cover the costs of special education?

According to the last U.S. census, nearly 1 in 12 children in the U.S., or about five million individuals, have some form of physical or mental disability. For the parents of these children, this means a long list of extra expenses, including special education, developmental services and experimental treatments, the cost of which can add up significantly over time.

Whether a child is diagnosed with a physical or mental disability early or later in life, the very nature of these expenses makes them eligible for use with a Flexible Spending Account (FSA). IRS regulations state that medical deductions can only be claimed if they are used for a legitimate medical purpose. Because the vast majority of special education programs combine some form of medical assistance with a traditional education, they are certainly applicable for FSA expenditure. While many of these FSA eligible expenses are clear-cut, there are some facets of special education where the lines begin to blur.

What special assistance is applicable with FSAs?

While the very nature of special education is tax deductible and applicable with FSAs, parents will need to prove that this instruction is being provided specifically for treatment of a medical condition.

Some examples of this are:

  • Teaching Braille to a visually impaired individual,
  • Lip reading lessons to the hearing impaired,
  • Language training to individuals with birth defects and many other forms of assistance that are needed to combat specific disabilities.
  • Additionally, most expenses will be eligible with FSAs if they are suggested by a physician to help treat and alleviate a specific disorder.
  • Parents can also utilize FSAs to cover some medical travel and transportation costs, home modifications and at-home care from trained professionals.

Are there any restrictions?

With the rollout of the Patient Protection and Affordable Care Act(PPACA), parents of children with special needs should be aware that FSA funds are now capped at $2,500 annually for single individuals, and up to $5,000 for couples who both have FSA accounts. With this cap in place, parents know exactly how large of a budget they have to work with when aiming to cover these expenses.

The status of a school being regarded as “special” has been a bone of contention between parents and the IRS in the past, but IRS regulations state that the cost of deductible medical care includes, “the cost of meals and lodging, if supplied, and the cost of ordinary education furnished which is incidental to the special services furnished by the school” [Reg1.213- 1(e)(1)(v)]. If a child is attending a public or private school that is not geared toward treating children with special needs, but a child will receive special services related to his or her disability, these expenses may be able to be written off as well.

Understanding exactly how you can use your FSA to cover medical expenses for all members of your family is difficult enough, so make the process easier with FSAstore.com. Our extensive Learning Center and Eligibility List will give you all the information necessary to make an informed decision about your next FSA eligible expense.

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