Of all the benefits of choosing a CCRC Life Care community, there is one that many people don’t know about: a surprising tax advantage that can have a tremendous impact on the affordability of this exceptional senior living option.
The CCRC life care medical expense deduction: A senior living tax advantage that you—and your tax advisor—should know about
For many older adults, a CCRC looks very attractive as a senior living option. You can move in knowing that you will receive the care you need as long as you need it, even if your financial situation changes. You need never move again, and you enjoy a vibrant, exceptional lifestyle filled with services, amenities, and companionship.
A CCRC can be expensive, with a large up-front admissions fee. However, potential tax advantages can change everything, according to Frank Shible, an Annual Filing Season Preparer with 37 years of experience in finance, who also resides at St. Mark Village and continues to prepare tax returns, including for many of his fellow residents. Frank also serves as treasurer for the Residents Council at St. Mark Village.
“When I sit down with my clients, they are shocked to learn how much they can save with these deductions,” says Shible. For seniors who itemize their taxes, the potential tax advantages of moving into a CCRC are two-fold:
- a one-time deduction of a percentage of your entrance fee
- an ongoing deduction of a percentage of your monthly fees
Download our free guide, Financial Planning Guide to Retirement Living at a Life Plan Community.
Just how much can you save?
To help illustrate the potential savings to clients, Frank created two fictitious tax forms, based on the scenario of a couple that moved into St. Mark Village nine months prior, and has been living in a two-bedroom deluxe with den apartment. The following numbers tell the story:
- Form A with no CCRC deduction
- $100,000 income with $31,000 Social Security taxable income
- Standard deductions only: approximately $28,000
- Refund: $6,100
- Form B, itemized, with the CCRC deduction
- $100,000 income with $31,000 Social Security taxable income
- Itemized medical expense deduction: approximately $78,000
- Refund: $13,000
“Say you pay an entrance fee of $240,000 upon move-in and you wonder what it will get you,” says Shible. “The answer is: a deduction of approximately $70,000 for a couple, which drops the cost of the apartment to $170,000.”
“Then, on top of that, you get a monthly medical deduction (which for double occupancy is around $800 a month) so your savings continue. And, if you have other personal medical expenses, such as copay, eyeglasses and so on, the savings really add up quickly.”
They key, according to Shible, is to look past the sticker price to what you will actually pay, once the tax advantage is factored in. After the first year of occupancy, a resident couple could still receive up to a $10,000 deduction just for the monthly service fees.
Unfortunately, many tax advisors aren’t aware of these significant tax deductions. This means their clients in CCRC life care senior living communities are missing out on saving thousands, as well as on receiving a bigger tax refund each year.
“When I first started doing resident taxes years ago, I questioned if these deductions were legitimate, as it seemed too good to be true,” says Shible, who annually completes continuing education courses required by the IRS, “but the deductions are approved by the IRS tax code. Every potential and current CCRC resident should know about them.”
How to make sure your tax advisor understands the CCRC life care medical expense deduction
“Be sure to ask the person who prepares your returns if they know about and understand the CCRC deduction. If they do not, find a professional who does know what it is.”
At St. Mark Village, residents receive a letter sometime in the first 2 months of the following year explaining how much of the admission fee and monthly service fees can be reported as a pre-paid medical expense deduction on the tax form. Frank says it’s important that each resident shares this letter with their tax advisor. “And be sure to choose someone who does not get in a hurry or try to do your return while you are sitting in front of them. These details require time and thorough review of the details.”
Amending a return: how far back you can go
“The IRS allows you to go back three years and amend your taxes,” he says. “I have amended many returns for clients who have missed these benefits. Now I’m their hero for life!”
Another reason a CCRC might be more affordable than you think
Some seniors fear that if they sell their home in order to move into a CCRC, they will pay a huge tax bill. Not true, says Shible. “As long as the profit you make from the home is less than a half million dollars for a couple, $250,000 for a single person, you are okay.”
“Say you bought a house for $200,000 and you sell it for $700,000. Your profit is $500,000, which is tax-free for a couple. That gives you more money in your pocket to put towards moving to a CCRC… where you can enjoy an exceptional lifestyle.”
Living in a CCRC has even more advantages
Residents of St. Mark Village in Pinellas County enjoy a vibrant, inspiring senior living environment where they find good friends, abundant opportunities to pursue physical health, intellectual and cultural fulfillment, and spiritual enrichment, and have quality care if needed, guaranteed—without having to leave the Village and their support system. That means seamless access to future care options.
Now as a resident, Shible is quick to sing the praises of CCRC life. “Since I began visiting St. Mark Village 20 years ago, the staff has remained almost the same. You can count on it. That tells me that management is taking care of the staff. And when staff is happy, residents are happy. I love it here.”
And why does he continue to help so many residents, as well as other clients, do their taxes? “When someone brings me their tax return to be done, it’s a puzzle. I love putting puzzles together. When I’m done, it’s so satisfying.”
Tax Advantage is just the beginning. We’d love to tell you about all the benefits of Life Care at St. Mark Village. Download our free guide, Financial Planning Guide to Retirement Living at a Life Plan Community, or contact us. We’d love to hear from you.
Disclaimer: St. Mark Village does not provide tax, legal or accounting advice. This article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.