Tax Benefits of CCRCs

Tax Benefits of CCRCs : 

Tax Benefits of CCRCs

CCRC Basics : 

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)

How to Calculate Your Deductible : 

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

Costs of a Type A Contract (Life Care/Extensive Care) : 

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

Tax Advantages of a Type A Contract (Life Care/Extensive Care) : 

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

Costs of a Type B Contract (Modified) : 

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

Tax Advantages of a Type B Contract (Modified) : 

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

Costs of a Type C Contract (Fee-for-Service) : 

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

Tax Advantages of a Type C Contract (Fee-for-Service) : 

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

Tax Liability : 

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

SeniorHomes.com : 

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