Medical costs associated with the monthly fee and entry fee are calculated annually using a per-capita (actuarial) method for residents whose contracts exclude prescription drug coverage. This actuarial approach assumes that the per-capita amount applies regardless of the level of care provided.
Based on the characteristics of all residents in that year, the prepaid health care portion of fees is determined on an individual (per-capita) basis, reflecting that health care services are utilized individually. Accordingly, a portion of both monthly fees and entry fees paid in that year may be attributable to prepaid medical expenses. A letter is provided annually to residents with these amounts.
For tax purposes, medical expenses, when combined with other allowable medical costs paid during the year, are deductible only to the extent that they exceed a specified percentage of adjusted gross income. Residents are encouraged to refer to the instructions for Schedule A of IRS Form 1040 for additional guidance.
Residents are also encouraged to consult their personal tax advisor regarding the deductibility of medical expenses for both federal and state income tax purposes.