As tax season approaches, it’s a good time to look beyond traditional deductions and explore the financial advantages of retirement living. If you’re considering a life plan community — also known as a Continuing Care Retirement Community (CCRC) — you may be surprised to learn it could offer valuable tax benefits.
In some cases, new residents may qualify for tax deductions related to both their entry fee and a portion of their monthly service fees. These potential deductions are often tied to the community’s healthcare services and can help offset retirement living costs.
Because every financial situation is different, it’s important to consult with a tax professional to understand what deductions may apply to you. But for many older adults, a life plan community can offer not only peace of mind and future security, but meaningful financial advantages as well.
Life Plan Community Tax Deduction Benefits
A life plan community that offers Lifecare, such as The Admiral at the Lake, requires the resident to pay an entrance fee and monthly service fees. The monthly service fees give the resident access to higher levels of care such as assisted living, skilled nursing, or memory care if and when they need it.
The entrance fee and monthly fees can be costly, but the independent living resident could itemize their taxes and might be able to deduct a portion of these fees as medical expenses. These fees are a pre-payment for future medical care which is the case with the Type A (Lifecare) residency contract. The deductions could also be possible with the Type B (modified) contract.
It’s important to note that the deductions are for nonrefundable entry fees and do not apply to refundable entry fees.
Save More In Taxes By Moving Sooner
It’s a good idea to move into a Lifecare community sooner to enjoy its health and social benefits, but it can also help you save money in the long run.
R.J. Zielinski, Chief Financial Officer at The Admiral at the Lake, explains the value of moving into a life plan community:
“Sometimes residents may need to liquidate a portion of their investments to cover the entrance fee. Doing so can result in realized capital gains, which may increase their taxable income in the year they move into a life plan community. However, that same year they may also benefit from a larger medical expense deduction, as both a portion of the entrance fee and monthly fees may qualify as deductible medical expenses.”
Tax-deducted medical expenses include:
- health insurance (and Medicare) premiums
- long-term insurance premiums
- assisted living and skilled nursing care
- prescriptions
- other out-of-pocket healthcare expenses.
Check With Your Financial Advisor
It’s always best practice to consult with a professional tax advisor if you have questions. Because of the ever-changing nature of taxes, the above information should not be interpreted as tax advice. Consulting with a tax professional who is well versed in life plan communities is the best way to find out what tax benefits you could qualify for if you decide to move to a CCRC or life plan community.
Financial Security for the Future
At The Admiral at the Lake, residents pay a one-time entrance fee and ongoing monthly service fees. These cover lifetime priority access to on-site assisted living, memory care and skilled nursing. These services are available at no additional cost and are available if or when a resident should need them.
Ready to explore life at The Admiral at the Lake? Connect with our team to learn more about our living options, vibrant community lifestyle, and personalized services. Schedule a tour or call 773-433-1800 to start the conversation.