Although Tax Day has come and gone, seeking savings on your taxes is a year-round pursuit. If you or a loved one are considering residency in a continuing care retirement community (CCRC, also known as a life plan community), you may be surprised to learn about the tax benefits that could be available to you.
Monthly CCRC service fee
Since CCRCs offer a continuum of care—from independent living to full-service nursing home care—some or all of the monthly service fee could be tax deductible as a medical expense since it is paying for health care costs that you may require as you get older, or health care services you are currently receiving.
Your tax savings depends upon your CCRC contract and your current level of care. For example, if you are living independently, the percentage of your monthly fee that is ensuring your future health care needs are met could be tax deductible. If you are receiving around-the-clock, skilled nursing services, 100 percent of your monthly fee could be deductible.
The total allowable deduction must exceed 10 percent of your adjusted gross income (AGI) in any given year. Those who were born before Jan. 2, 1950 must have qualified expenses that are at least 7.5 percent of AGI. (For specific details see IRS Pub. 502- Medical and Dental Expenses, “Lifetime Care- Advance Payments.”)
Parents as dependents
In addition, a parent who meets certain income levels and who relies upon an adult child for at least 50 percent of their support in any given year can be claimed as a dependent on the adult child’s tax return.
Ask an expert
Overall, understanding tax policy and maximizing your deductions can be a complicated issue. Before making changes to your current tax plan, My LifeSite recommends consulting with a tax accountant to develop a strategy that will address your unique situation.
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