Savings Now, Good Health in the Future

If you’re looking for another reason to love the hassle-free lifestyle Ventana by Buckner offers, we have some timely information!

The IRS allows residents of Life Care Continuing Care Retirement Communities (CCRC) to take a one-time deduction equal to a percentage of the non-refundable portion of their deposit. Residents also are allowed an annual deduction equal to a percentage of their total annual monthly fees paid each year.

To summarize: When a CCRC offers residents the promise of access to on-site services in higher levels of care in exchange for a one-time deposit and monthly fees, the IRS views this as pre-payment of future expense for health care services.

Caveats Worth Noting

Residents can only deduct from their taxable income the portion of CCRC payments tied to the community’s annual health care operating expenses to the community’s total annual operating expenses. Nationwide, that percentage ranges from 30-40 percent, depending on the expense structures the individual CCRC employs.

For instance, in 2014 residents of one national retirement living provider were able to deduct 36.18 percent of entrance fees and 38.61 percent of monthly fees as prepaid health care expenses.*

Residents can only deduct the portion of the fee that is not returned to them or their estates in the future. Residents can take the full deduction when they pay the entrance fee.

Residents of rental retirement communities are not allowed this same tax benefit.

*CCRC-related tax deductions are complex and the information in this article is general in nature so each prospective resident should speak to their own tax counsel or financial advisor regarding any potential tax or financial planning matter.