NC Tax Credit for Children with Disabilities Requiring Special Education

The state of NC allows for a tax credit for taxpayers who pay tuition and special education and related services expenses for an eligible dependent child.  This credit is effective for tax years beginning on or after January 1, 2011.  For full details regarding this tax credit, please click on the following link:  http://www.dor.state.nc.us/practitioner/individual/directives/pd-12-1.pdf

In brief, the credit is the lesser of $3,000 per semester for each eligible dependent child or the amount the taxpayer paid during the tax year for tuition and special education and related services expenses.  For purposes of the credit, there are only two semesters during each tax year.  Therefore, for 2012, the maximum credit allowed per eligible dependent child is $6,000 ($3,000 for each semester).  The credit is limited to the amount of North Carolina income tax for the year reduced by the sum of any other credits.  However, any unused portion of the credit may be carried forward for three succeeding years.  There are items that both reduce the credit and disqualify and child from being eligible that should be further understood prior to applying the credit to your tax filing.  Additionally, there is a lengthy list of documentation that must be in your records to accurately claim the credit. 

An eligible dependent child for the purposes of this credit is defined as a child who is a NC resident and enrolled in grades kindergarten through 12 in a nonpublic or a public school where tuition is charged by the local board of education.  In addition, the child must meet ALL of the following criteria:

1.   Is a child with a disability who requires special education and related services because of that disability.

2    2.  Was determined to require an individualized education program.  An individualized education program is a written statement for a child with a disability that is developed, reviewed, implemented and revised consistent with IDEA and Sate law.

3    3.   Receives special education services on a daily basis.

4    4.  Is a child which the taxpayer is entitled to deduct a personal exemption under section 151(c) of the Code for the tax year.

Every three years, an eligible dependent child must be reevaluated by the local education agency to verify that the child continues to be a child with a disability who requires special education and related services because of that disability. 

If you feel you are eligible for this credit, please contact our offices for an evaluation as you want to make sure all of the appropriate steps are taken and the documentation is required is on file for the application of this credit.

brad@mcarthurco.com
704.544.8429