I’ve come to find I have a very different opinion about the income taxes I pay. I’m not going to say I’m a raving fan (I’m not), but if I’m being honest my son and I are more than likely going to get more in State and Federal benefits than we’ll ever pay from our taxes – and that’s the purpose of an income tax; it’s how governments make the money they need to pay for the programs they offer.
Yes, I track my deductions and I’m typically able to itemize every year; but I wouldn’t consider myself fanatical about it. According to the US Census Bureau American households median income in 2017 was $57,652 – which means the average person in the US will be in the 22% tax bracket (Federal), assuming both people in a marriage are earning the median. Additional taxes will be incurred based on your State, but unless you’re making upwards of $190k/year you probably don’t need to be worrying about “tax planning”.
There are basic things I believe everyone should do – especially families including a person with a disability. Learn what can, and can’t, be deducted. Yes, there is a requirement to spend more than 10% of your income before you can deduct medical expenses and there are strict rules for when you can deduct health insurance premiums (self-employed being one case); but for many families like mine the medical adds up quickly.
It’s not just the cost of the medicine and/or co-pay for doctor visits. Here are a few examples (this is not tax advice, you will still want to consult with a professional about your circumstances). The IRS ruled (Letter Ruling 200729019) some schools may be deemed “special schools” and are eligible for a tax deduction – http://www.journalofaccountancy.com/Issues/2013/Jun/20137378.htm. Mileage and hotel stays when going to hospitals/treatment centers may be deductible; and there are apps available to track your mileage (https://www.uberkit.net/blog/7-best-free-mileage-tracking-apps/).
If you are charging your child rent (for example to help them qualify for SSI) you should be reporting the rent as income to you. Your accountant may be able to help you find deductions to offset this income. If you, or your child, are contributing to an ABLE account then look into State tax deductions – not every state will offer them, and if they do you will more than likely need to be a resident to receive it. You may also qualify for the Federal Savers credit. As a reminder, credits are MUCH better than deductions because they are a dollar for dollar reduction.
One more consideration; if you have a child who is significantly impacted by their disability – the metric I recommend using (financially) is if they qualify for SSI before the age of 22. The social security you receive in retirement (or if you become disabled) will affect your child’s benefit (adult disabled child benefit). Your social security is determined by the average of your highest 35 years of wages, and the taxable maximum on earnings (2019) is $132,900. So I would challenge you to allow your reported income to get to this level (still take advantage of IRA, 401k, SEP, etc; because these reduce taxable income after you pay your social security tax).