Bob Bertolette discusses tax benefits of a CCRC

Bob Bertolette, President/CEO

The Tax Court’s 2004 decision is great news for those living in a Lifecare Continuing Care Retirement Community (CCRC) such as Riddle Village. The decision confirms that a resident can continue to treat a significant percentage of the one-time entry fee and recurring monthly fee as a prepaid medical expense regardless of the level of utilization for such services.

Bill Bischoff stated in his Wall Street Journal Social Network article, that in order to be eligible for such a medical tax deduction, the IRS requires that “a person must enter into a CCRC-like contractual lifetime-care arrangement in order to claim current medical expenses deductions for amounts paid to the community that doesn’t depend on the level of medical services actually provided to that person.”

In other words, such a deduction is only available to residents living in a true Lifecare retirement community like Riddle Village, regardless if there was any utilization of health care services during that particular year. This is not the case with a “fee-for-service” or “pay as you go” type communities.

In order to minimize any errors in making this complicated calculation, Riddle Village has been using the services of an independent accounting firm, who also completes our annual Medicare Cost Reports, to compute the percentage deduction that the IRS may allow. To put it as simply as possible, these percentage calculations are based on the CCRC’s aggregate medical expenditures in relation to overall expenses or overall revenue from the fees paid by the residents.

Each year the percentage varies as it is dependent on the actual utilization of health care services and related expenses. In 2016, the medical tax deduction for Riddle Village apartment residents was 29% of the monthly fee and 67% of the one-time entrance fee Plan A non-refundable portion, 89% of Plan B non-refundable portion and 100% of Plan C non-refundable portion, for those who moved in that particular year. However, it is important to keep in mind that 100% of the monthly fee is tax deductible for those permanently residing in Personal Care or Health Care Center.

The Advantage of Continuing Care Retirement Community

One of the biggest advantages of living in a continuing care retirement community, like Riddle Village, is the ability to increase or decrease a resident’s care needs. As the need for medical care increases, the resident does not need to worry about relocating or having to find care independently.

The Lifecare plan at Riddle Village offers unlimited Personal Care or Nursing Care with no unexpected increase in the monthly service fee. Choosing Lifecare at Riddle Village is choosing peace of mind for yourself or your loved one.

CCRC Tax Deductions

Among the many continuing care retirement community advantages are CCRC tax benefits. In a true-Lifecare community, such as Riddle Village, you can deduct a portion of the entry fee paid in the first year as well as a percentage of the monthly fees paid each year as prepaid medical expenses.

Even if the resident is currently healthy and does not need a higher level of care, a deduction is allowed for what is really prepaid medical expenses in a CCRC. There is a threshold of 10% of adjusted gross income for medical expenses, but the year you pay the entry fee, you can end up with a significant CCRC tax deduction.

Caring for Aging Parents: Caregiver Tax Advantages

The number of caregivers taking care of elderly parents is continually growing. If you are a caregiver, you probably devote a lot of time, energy and financial support to the care of your aging parents.

The recent tax reform is the first major change to tax laws in decades. Some changes will be beneficial to those who care for the aging population, but others will not. Although the new tax plan takes away the ability to take a personal exemption when claiming a qualified family member or friend, it does not eliminate the option of claiming those receiving care as dependents if specific qualifications are met. These rules include:

  • Can’t be claimed as a dependent by anyone else
  • Income under $4,050 (using 2017 information), not including disability or Social Security
  • Is not able to pay over half of their personal living expenses
  • Is a relative as defined by the IRS, or someone not related to you who have lived with you for at least half the year

Additionally, in 2018, a credit in the amount of $500 is available for dependents who are not children to help those caring for elderly or disabled family members.

Understanding Tax Implications at Riddle Village

Each year, we provide our residents with a written notice outlining the calculated percentages. Anyone moving into a Lifecare CCRC should consult with his or her personal tax advisor regarding the tax implications of the deduction on their personal tax return.

The bottom line is that there is a significant financial benefit to moving into a true Lifecare retirement community due to the fact that the IRS continues to recognize a percentage of both the one-time entrance fee and the monthly fee as a pre-paid medical expense deduction.

After meeting the medical and financial requirements for entering a Lifecare community, you can take comfort in having the health care protection allowing you to extend and/or protect your hard-earned retirement assets by avoiding any catastrophic or unexpected health care costs.

Schedule a visit at Riddle Village for a firsthand look at our personalized services and luxurious amenities.