Tax Benefits of CCRCs
CCRC Basics
• Adapt to residents’ changing mobility and
health needs
• Tax benefits can offset the costs of entrance
and m...
How to Calculate Your Deductible
• Ask the facility for a statement of annual operating costs
• Use the percentage allocat...
Costs of a Type A Contract
(Life Care/Extensive Care)
• Requires a substantial entrance fee
– May include a refundable por...
Tax Advantages of a Type A Contract
(Life Care/Extensive Care)
• Portions of the non-refundable entrance fee and
unreimbur...
Costs of a Type B Contract
(Modified)
• Resident pays a refundable (to the estate or beneficiary)
upfront fee
• Ongoing mo...
Tax Advantages of a Type B Contract
(Modified)
• No tax deduction for refundable entrance fees
– Tax code treats as below-...
Costs of a Type C Contract
(Fee-for-Service)
• May require an entrance fee
• Discounted health care or assisted living ser...
Tax Advantages of a Type C Contract
(Fee-for-Service)
• Residents can deduct:
– Part of any non-refundable entrance fee
– ...
Tax Liability
• CCRCs are responsible for giving residents accurate
information
• Resident alone answers to IRS
• Journal ...
SeniorHomes.com
• Information in this presentation provided by
senior housing writer Lisa Logan, Ph.D.
• SeniorHomes.com i...
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Tax Benefits of CCRCs

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CCRCs (Continuing Care Retirement Communities) adapt to aging residents’ changing mobility and health needs, but this peace of mind comes with a cost. CCRC tax benefits can offset the costs of entrance and monthly fees.

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Tax Benefits of CCRCs

  1. 1. Tax Benefits of CCRCs
  2. 2. CCRC Basics • Adapt to residents’ changing mobility and health needs • Tax benefits can offset the costs of entrance and monthly fees – In excess of 7.5% of adjusted gross income – Must sign a lifelong care contract – Depends on type of contract (A, B, or C)
  3. 3. How to Calculate Your Deductible • Ask the facility for a statement of annual operating costs • Use the percentage allocated to medical care • Percentage will be the same for all residents, regardless of level of care • American Senior Housing Association Special Brief, “Key Tax Benefits for Seniors Housing Residents” (2008) – Usually 30% or more of CCRC operating expenses go towards medical care
  4. 4. Costs of a Type A Contract (Life Care/Extensive Care) • Requires a substantial entrance fee – May include a refundable portion payable to resident’s estate or beneficiary • Monthly fee in exchange for: – Guaranteed lifetime occupancy in an independent living unit – Certain services and amenities • Residents can transfer to assisted living or memory care without an increase in the monthly fee • Spouses may retain independent living unit at the same fee • Monthly fees vary according to inflation and costs • Fees unrelated to a resident’s use of care and services
  5. 5. Tax Advantages of a Type A Contract (Life Care/Extensive Care) • Portions of the non-refundable entrance fee and unreimbursed monthly fee in excess of 7.5% AGI • Residents can maximize deductions the first year due to large entrance fees • By calculating the cost of medical care to the CCRC overall, taxpayers may have trouble exceeding the 7.5% of AGI minimum
  6. 6. Costs of a Type B Contract (Modified) • Resident pays a refundable (to the estate or beneficiary) upfront fee • Ongoing monthly fee • Right to lifetime occupancy in an independent living unit, with certain services and amenities • Differs from Type A in that the CCRC must provide assisted living or nursing care only for a limited period of time (30-60 days) or at a discounted rate indefinitely – Monthly fees increase with the level of care – Undiscounted monthly rates range from $5,000 - $9,000 – Spouse continuing in independent living would also pay a monthly fee
  7. 7. Tax Advantages of a Type B Contract (Modified) • No tax deduction for refundable entrance fees – Tax code treats as below-market-rate loans • Portion of unreimbursed monthly fees related to CCRC medical expenses are deductible • If residents use this deduction when in independent living, they cannot also deduct 100% of those fees when in assisted living or skilled nursing
  8. 8. Costs of a Type C Contract (Fee-for-Service) • May require an entrance fee • Discounted health care or assisted living services are excluded • Monthly fees increase with level of care • When/if health care needs change, residents pay regular per diem rates
  9. 9. Tax Advantages of a Type C Contract (Fee-for-Service) • Residents can deduct: – Part of any non-refundable entrance fee – Unreimbursed monthly fees related to medical expenses • Residents cannot deduct 100% of these monthly fees if they deducted them previously when in independent living
  10. 10. Tax Liability • CCRCs are responsible for giving residents accurate information • Resident alone answers to IRS • Journal of Taxation (2007): – Establishing the correct figure is tricky • Experts suggest: – Use a tax adviser – Ask for CCRC supporting documentation and annual expense reports • Seniors should consult with attorneys and/or financial counselors prior to signing any contracts
  11. 11. SeniorHomes.com • Information in this presentation provided by senior housing writer Lisa Logan, Ph.D. • SeniorHomes.com is a free resource for seniors and families searching for housing and care services • Visit http://www.seniorhomes.com for more information on senior housing
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