SUNSHINE TERRACE FOUNDATION

TAX DEDUCTIBILITY OF SUNSHINE TERRACE FOUNDATION SERVICES

Determining deductibility of the expenses incurred for the services we provide is complex and not within our area of expertise. Thus, the Sunshine Terrace Foundation cannot provide tax advice, and recommends that all questions be referred to a competent tax advisor of the inquirer’s choice. Following is an overview of the general issues surrounding tax deductibility of medically related services.

Amounts paid by people using our services for rent or care services cannot be deducted under the charitable contribution rules.

There are a number of hurdles to be navigated in applying the tax rules for deductible medical expenses. First, a determination must be made as to whether or not the expense is a qualifying medical expense. To qualify, the payment must generally be for “…the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body for the individual or for the individual’s spouse or dependents.” (CCH Master Tax Guide, page 64)

Not every expense incurred is deductible. Expenses paid for merely beneficial care, cosmetic surgery (unless necessary to correct a congenital abnormality or, the results of an accident or disfiguring disease) and non-prescription drugs are among the items which are not deductible.

“The cost of in-patient care (including meals and lodging) at a medical-care institution that is not a hospital qualifies if the individual is there primarily for the availability of medical care, and the meals and lodging are necessary incident to that care. If this test is not met, only the portion of the cost attributable to medical care qualifies. Medical care status depends on the nature of the patient’s condition and the nature of the services rendered, not on the nature of the institution.” (Thomson/RIA, Federal Tax Handbook, page 383)

In addition, only expenses that have not been reimbursed by medical insurance or other sources (Medicare, Medicaid, etc.) are deductible.

The individual must itemize his/her deductions instead of claiming a standard deduction.

The allowable medical expenses must be great than 7.5% of the individual’s adjusted gross income.

If the individual has adjusted gross income of $69,750 (single person) or $139,500 (married person who is filing jointly), then the deduction may be further limited by 3% of the adjusted gross income. (These amounts are indexed each year. The amounts given here are for 2003 only).

In certain circumstances, large medical expenses could contribute to the individual being subject to the Alternative Minimum Tax. The result of this is that any deduction is further limited if not entirely eliminated.

The above general information is not meant to be advice, but its purpose is to give an overview of the complex nature of tax deductibility of the cost of services provided by the Sunshine Terrace Foundation. Again, we cannot give advice, and we recommend that a competent tax advisor of the inquirer’s choice to contacted.