The Tax Man Cometh! Let’s Talk Dollars and Sense

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Frank Apperson, Accounting Director

Did you know that a portion of your monthly fee paid here at Park Springs, Atlanta retirement community, is tax deductible as a medical expense?  It is true.  In IRS policy pronouncements as well as in case law there is a determination that a portion of the monthly fee is deductible for medical expense purposes.

Our community management group, Life Care Services, annually makes a calculation to determine what that deductibility amount can be.  There is a particular methodology used in calculating this deductibility that adheres to the decision of the court in Delbert L. and Margaret J. Baker v. Commissioner  (122 T.C. No. Eight), decided in U.S. Tax Court on 19 February 2004.  In addition, more guidance was provided in U.S. District Court in John O. Finzer, Jr. and Elizabeth M. Finzer v. United States of America (Case No. 06 C 2176) on 20 July 2007.  The Baker v. Commissioner case is our primary guide for this work.  There are variations of interpretations on the very complex case decisions. The IRS has also provided policy rulings in section 213 of the tax code as well as in Revenue Ruling 76-481.

Life Care Services uses all available avenues of expertise in deriving the deductibility percentage or dollar amount for Park Springs in order to make sure we are in compliance with IRS requirements.  Thus, we are able to provide members with two options, a percentage of the monthly fee method, or a fixed dollar amount method.  For example, for the tax year 2009 our members could deduct either 16.43% of the total monthly fee per person paid during the year, or they could opt to deduct $318.00 per person per month.  The prudent member would use the most advantageous figure, of course.

This calculation is performed every year after the prior fiscal year is closed and during the compilation of our annual Medicare Cost Report.  Life Care Services provides the calculation results to us by the end of January each year, and we then send by 1 February a summary letter to all members for their benefit in completing their annual tax return.  The percentage and amount figures also vary year by year.

Neither I, nor Park Springs, nor Life Care Services are tax professionals.  The figures provided to our members are based on a good faith effort to apply the tax law appropriately.  We urge you in the strongest possible way to consult with a competent tax professional concerning what is best for you and your particular situation.

You know, talking about tax law is about as exciting as watching paint dry!  But, when it is your personal pocketbook at stake, then information such as this can prove to be very helpful indeed!

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Stone Mountain, GA 30087

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