Be in the Know: Life Plan Communities Offer Some Valuable Tax Benefits
When looking at retirement living options, buying or renting into a senior living community are well-known options. But choosing to live in a Life Plan Community offers some valuable federal tax benefits that other senior living options do not. Read on to learn more.
What is a Life Plan Community?
Life Plan Communities, also known as Continuing Care Retirement Communities (CCRCs), provide the security of having a plan in place for any future healthcare needs that might arise. Residents live independently, knowing if they ever need care, they’ll have it. Most CCRCs offer multiple service levels: Independent Living, Assisted Living, Skilled Nursing, and memory support services, all available when you need them.
What are the tax benefits?
Current federal income tax laws permit residents at Life Plan Communities or CCRCs like John Knox Village in Pompano Beach a tax deduction on a sizeable portion of the one-time entrance fee the year of move-in. In addition, a percentage of the monthly service fees paid during each year can be itemized as a medical expense.
At the beginning of each year, in some communities, such as John Knox Village, auditors calculate the portion of the Entrance Fees and Monthly Service Fees that are attributable to medical expenses and provide this information to residents for their tax preparation.
Can a financial advisor help me navigate this?
Tax and financial advisors can play a crucial role in helping seniors living in CCRCs and Life Plan Communities navigate the complexities of tax laws related to their unique situation. An advisor can help you understand CCRC-related tax deductions, such as:
• The amount or portion of your healthcare services and fees to the CCRC, as applicable
• Other potential itemizable deductions, such as local income taxes related to living in a CCRC
• Specific tax implications of different types of CCRC contracts, including the nuances of life care, fee-for-service, and other modified contracts
In addition, financial advisors can help seniors project future healthcare needs and provide guidance on potential tax implications for accessing long-term care services within or outside of the CCRC.
How much can I deduct?
According to Carol Enisman, Investment Advisor Representative and Managing Partner at Premier Wealth Planning in Fort Lauderdale, “The current tax code allows you to deduct a portion of your unreimbursed medical and dental expenses that exceed a set percentage of your Adjusted Gross Income.”
However, she says, it’s important to note that you’ll need to itemize your deductions rather than take a standard deduction, which would disqualify you from claiming medical expenses.
I’m not sure which type of care contract I should choose. Can you tell me the tax benefits of each?
The tax benefits may vary, depending on which type of care contract you select. A Life Plan Community Consultant can explain the different contract options, including Type A, B, and C contracts, and what each includes. Depending on how much healthcare coverage is included in the contract you choose, the medical expense tax benefit may vary.
For some types of CCRC contracts, a portion of the entry fee and monthly fee may be applied toward future medical expenses. Essentially, this portion is considered a pre-paid medical expense and may be included as part of your annual medical expenses.
Are there any other deductions seniors should keep in mind when filing taxes?
Many healthcare-related expenses — such as hospital bills, prescriptions, dental and vision care, in-home medical care, and hearing aids — may be tax-deductible if you itemize deductions.
The IRS allows you to deduct qualified unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI).
In addition, transportation costs for medical care, such as mileage to and from doctor’s appointments, as well as parking and tolls — may also qualify.
The bottom line?
A Life Plan Community can offer some true financial and tax benefits that other senior living options do not. Be sure to do your research. Make sure you’re taking advantage of any deductions you may be eligible to take.
Most importantly, it is always best to speak with your tax professional, who will be able to advise you with up-to-date tax regulations.
Want to learn more about John Knox Village? Contact us today for a no-pressure conversation with a Life Plan consultant or to schedule a visit.





















