As seniors explore their retirement living options, many are drawn to Continuing Care Retirement Communities (CCRCs) for their combination of vibrant, independent living and long-term security. CCRCs offer a full continuum of care, including independent living, assisted living, and skilled nursing, all within the same community. This ensures that as residents’ needs evolve, they have access to the appropriate level of care without having to relocate. Beyond the lifestyle and healthcare benefits, many residents are surprised to learn that certain CCRC costs may also provide valuable tax deductions.
What Are CCRC Tax Deductions?
One of the financial advantages of moving into a CCRC is the potential for tax deductions on qualifying expenses. Specifically, residents may be able to deduct portions of:
- Entrance Fees – Many CCRCs require a one-time entrance fee upon move-in. A percentage of this fee is often considered a prepayment for future medical care, qualifying as a medical expense deduction.
- Monthly Fees – A portion of ongoing monthly fees may also be deductible, as they often contribute to future healthcare services, even for residents currently in independent living.
The exact percentage of fees that qualify as medical expenses varies by community and is typically determined annually based on the CCRC’s allocation of healthcare-related costs.
Who Qualifies for CCRC Tax Deductions?
The Internal Revenue Service (IRS) allows deductions for medical expenses that exceed 7.5% of a taxpayer’s adjusted gross income (AGI). To claim CCRC-related deductions, residents must:
- Itemize their deductions rather than taking the standard deduction.
- Meet the IRS medical expense threshold, meaning that their total medical expenses, including qualifying CCRC fees, exceed 7.5% of their AGI.
Given these requirements, individuals with higher medical costs or lower AGI may benefit the most from these deductions. For detailed information, refer to the IRS guidelines on Medical, Nursing Home, and Special Care Expenses.
Breaking Down Deductible Costs
While each CCRC will have its own tax-deductible allocation, residents can generally expect:
- A percentage of the entrance fee (often between 30-50%) to be deductible as a medical expense.
- A portion of the monthly fee (typically 30-40%) to qualify for deductions based on the community’s annual determination of healthcare-related expenses.
For example, if a resident pays an $800,000 entrance fee and 45% is deemed deductible, they may qualify for a $360,000 medical expense deduction in the year the fee is paid. Similarly, if monthly fees are $5,000 and 35% is deductible, residents could claim $21,000 in deductions annually.
Renowned senior living expert and financial advisor Brad Breeding offers insights in his article “Is Your Retirement Community Entry Fee Tax Deductible?”
How to Claim a CCRC Tax Deduction
To ensure eligibility and maximize deductions, residents should:
- Request an Annual Statement – Most CCRCs provide residents with documentation detailing the portion of fees allocated to healthcare expenses.
- Consult a Tax Professional – Given the complexities of tax law, working with an expert familiar with senior living finances can help optimize deductions.
- Maintain Records – Keep copies of CCRC statements, invoices, and any related medical expense documentation to support your tax filings.
Benefits Beyond Tax Deductions
While tax savings are an appealing advantage, the benefits of CCRC living extend far beyond financial incentives. Residents enjoy:
- Comprehensive, future-focused care without the stress of moving as health needs change
- An enriching lifestyle with social, cultural, and wellness programs
- Financial predictability, as many CCRCs provide structured pricing models that help with long-term planning
Why Choose The Clare?
At The Clare, we offer an unparalleled retirement experience with:
- Luxury amenities, including fine dining, wellness programs, and cultural activities.
- Comprehensive healthcare options, ensuring seamless transitions through different levels of care.
- Financial transparency, providing residents with clear insights into costs, tax benefits, and long-term planning.
Many of our residents have discovered the value of tax-deductible expenses, enhancing their financial well-being while enjoying the vibrant, supportive community at The Clare.
Take the Next Step
Uncover the financial benefits of living at The Clare. Contact us today to explore senior living options, or schedule a personal tour to experience our exceptional care, vibrant lifestyle, and the financial peace of mind we provide.
Call 312-313-2421 today to take the first step toward your future at The Clare.