Your Taxes: Do your kids have learning problems?

Many parents may not be aware of the Israeli tax reliefs available if their kids have learning problems. This article may help them receive money. We also discuss the tax side of more serious cases of institutionalized children, spouses and parents.

What type of learning problems?

The Israeli Income Tax Ordinance (ITO) grants personal tax credits, known as “credit points,” regarding a child classified as having “impaired ability.” In recent years, people having become increasingly attuned to the needs of children with a learning disability.

Consequently, there has been a growing clamor by parents and professional advisers to recognize this problem, resulting in a more liberal interpretation of the ITO rules regarding “impaired ability.”

Up until 2002, the definition of “impaired ability” was quite specific. In 2003 the application of Section 45 of the ITO was widened, and the tax credit is now available to parents of children suffering from attention deficit disorder (ADD) and attention deficit hyperactivity disorder (ADHD).

How much tax relief?

If such a parent is an Israeli resident, the tax relief allowed is two “credit points” per affected child.

The tax relief can be reduce tax due by NIS 5,160 for 2012 and NIS 5,232 in 2013. Claims can be made retroactively for six years.

However, this tax relief is not allowed if the joint taxable income of the parents exceeds NIS 262,000 in 2012 and NIS 265,000 in 2013. In the case of single-parent families, this tax relief is not allowed if the taxable income of the parent exceeds NIS 163,000 in 2012 and NIS 166,000 in 2013.

Conditions

In order to distinguish between slight impairments and more serious deficiencies, three criteria are generally applied: 1) determination by a special review board regarding eligibility for special education; 2) confirmation that the child receives special education; 3) confirmation from a neurologist doctor.

Since no special education exists from the ninth grade onward, pupils who receive confirmation from the Education Ministry that they are eligible for the ministry’s “07” program are treated as receiving special education. This addresses the first two criteria above.

In addition, in practice, in the case of children eligible for disability support payments from the National Insurance Institute due to serious learning impairment, the parents may claim this tax relief.

This is a useful Israeli tax relief not always claimed. Check it out if it seems relevant.

Institutionalized children, spouse, parents

There is a separate tax relief in ITO Section 44 for taxpayers who pay money to a special institution to care for children, spouses or parents who are bedridden, blind or not of sound mind, or for retarded children.

The tax relief takes the form of a 35 percent tax credit for expenditure to the institution to the extent it exceeds 12.5% of taxable income.

The same taxable income limits apply as for Section 45 relief. It is not possible to claim both tax reliefs; under Section 44 and 45, in applicable cases you have to choose between them and claim whichever is more worthwhile for you.

As always, consult experienced tax advisers in each country at an early stage in specific cases.

leon@hcat.co
orit@hcat.co

Leon Harris and Orit Sitton are tax specialists at Harris Consulting & Tax Ltd. in Ramat Gan.