January 24, 2022
Tax season is almost upon us. Have you taken the time to consider the tax benefits of a life plan community?
If you are considering a life plan community (also known as a CCRC) to retire, you may not know it could have a positive impact on your taxes. New life plan community residents could qualify for a tax deduction on their entry fee and monthly fees.
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.
Dan Churchill, Chief Financial Officer at The Admiral at the Lake, explains the value of moving into a life plan community as far as taxes are concerned:
“Sometimes the residents will have to liquidate some of their investments in order to pay the entrance fee. In liquidating some of their investments, they may have to realize some capital gains on that liquidation. They are now taxed on those capital gains which is taxable income. So, in the year they move into a life plan community, they may pay higher taxes on capital gains on the liquidation on their investments, but they will also have a higher medical expense deduction because they get to claim the entrance fee deduction and the monthly fee deduction.”
Tax-deducted medical expenses include:
- health insurance (and Medicare) premiums;
- long-term insurance premiums;
- assisted living and skilled nursing care;
- 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.
To learn more about living options and the lifestyle at The Admiral at the Lake, contact us to schedule a tour or call at 773-433-1800.