Many CCRCs work a bit like the concept behind an insurance company where everyone who lives in the community is paying in, and a portion of those payments covers the costs of medical care for the residents who need it.
Calculating your medical expense tax deduction It is based purely on your personal medical expenses, adjusted gross income, and how healthcare expenses are handled at the retirement community, per the type of residency contract. Surprisingly, I’ve even heard community representatives suggest this.īut you should understand that this deduction has nothing to do with the tax status of the retirement community. There is some confusion about whether such a tax deduction is only available at non-profit CCRCs. > Learn more about CCRC residency contract types Impact of a for-profit vs. In rare circumstances, a smaller deduction may even be available for a fee-for-service contract (Type C), if it can be clearly shown by the organization that some part of the fee(s) is being used to subsidize the cost of care delivered by the community. Essentially, this portion is considered a prepaid medical expense, and thus may be included as part of your annual medical expenses.įor a lifecare contract (Type A) and, to a lesser degree, a modified fee-for-service contract (Type B), it is more common that a portion of your fee is considered a pre-paid healthcare expense. The reason for this is because with some CCRC residency contracts, a portion of your entry fee and monthly fee may be applied toward future medical expenses.
Some are surprised to learn that even in this case you may still be able to take the medical expense deduction on a portion of the entry fee (in year one) and the ongoing monthly fees, assuming you qualify based on the above description. (Update: In 2017 the threshold changed to 10% from 7.5) Medical expense tax deductions in a CCRCįor residents of continuing care retirement communities, let’s say you move into an independent living residence you are healthy overall and require no on-going care services. NOTE: This deduction would only be available if you itemize your tax return rather than taking the standard deduction. Put another way, any expenses over 7.5 percent of your AGI are deductible from your taxes. This is true for anyone, whether you live in a retirement community like a CCRC or not. If your qualifying medical expenses over the course of a tax year exceed 7.5 percent of your adjusted gross income (AGI), you can deduct that difference. What is the medical expense tax deduction?įirst and foremost, it’s important to understand how the medical expense tax deduction works. In this post we’ll cover the details about this deduction, but please be sure to consult with your accountant or tax preparer before making any decisions. Here at myLifeSite we are frequently asked about medical expense tax deductions at a continuing care retirement communities (CCRCs, or “life plan communities”).
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