CCRCs (Continuing Care Retirement Communities) adapt to aging residents’ changing mobility and health needs, but this peace of mind comes with a cost. CCRC tax benefits can offset the costs of entrance and monthly fees.

1. Tax Benefits of CCRCs

2. 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)

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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