Letter to a Bloomington, MN parent from
Deb Stadsklev, Technical Coordinator, IRS

Midwest Area, St. Paul, MN, February 2, 2005

Constituents have inquired whether the parental contributions to TEFRA for the care of their dependent children with disabilities who live with their families are deductible as a medical expense.  The MN Health Care TEFRA Option is available to:

Children with disabilities who live with their families.  To qualify for TEFRA, a child must meet ALL of the following conditions:

• live with at least one parent,
• be under 18,
• have a disability determination from the State Medical Review Team,
• need a certain level of home health care to stay at home which compares to the level of care provided in a hospital, nursing home or an intermediate care facility for the mentally retarded,
• the cost for home care must not be more than the cost for care in a medical institution.

The MN Health Care TEFRA Option pays the following types of services:

• Clinic and physicians' services,
• Immunizations,
• Preventive health services including routine physicals,
• Ambulance and emergency room,
• Inpatient and outpatient hospital care,
• Lab, X-ray,
• Medical equipment and supplies,
• Prescription drugs,
• Dental care,
• Chiropractic care,
• Physical, occupational, speech, respiratory and rehabilitative therapy,
• Eye exams and eye glasses,
• Hearing aids,
• Transportation services,
• Mental health services,
• Alcohol and drug treatment,
• Prosthetics,
• Podiatry,
• Nursing facilities,
• Home health services,
• Hospice care,
• Private-duty nursing,
• Personal care services,
• Special education services,
• Group homes for people who are mentally retarded,
• Other health insurance premiums that are considered cost-effective.
• Enrollees get all their services directly from contracted medical providers.
• What services are not paid?
• Missed appointments,
• Cosmetic surgery,
• Autopsy.

See:  http://www.dhs.state.mn.us/main/groups/healthcare/documents/pub/dhs_id_007117.hcsp

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Internal Revenue Code section 213(a) allows an itemized deduction for expenses paid during the tax year for the medical care of the taxpayer, the taxpayer's spouse, or a dependent to the extent that such expenses exceed 7.5 percent of adjusted gross income.  It defines medical care as for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.

It is immaterial that the payments are paid to the governmental agency versus directly for the medical services.  The expenses paid through TEFRA as listed are clearly medical expenses that would be considered deductible under IRC 213.  If the nature of the expenses covered under TEFRA change, the taxpayer will need to determine on an individual basis whether the payments are for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.

Internal Revenue Code section 213 and IRS Publication 502, Medical and Dental Expenses, can provide more information on what constitutes a medical expense.**

Deb Stadsklev
Technical Coordinator
Midwest Area, St. Paul, MN

** If you would like a copy of Internal Revenue Code section 213, go to http://www.arcminnesota.com/IRC213.htm  

** If you would like a copy of IRS Publication 502, go to http://www.arcminnesota.com/IRSPub502.pdf