Tax Break Helps Pay for CCRC Fees

• You don’t have to be actively using health care services to claim the deduction. It is available from day one, even if you don’t need health care immediately upon moving in.

The percentage of CCRC fees considered deductible can change from year to year, depending on the CCRC’s costs. Different contract types and fee structures can also impact the amount of the potential deduction.

CCRC Alternatives and Other Senior Living Tax Breaks

Data shows that the percentage of the U.S. population age 65 and older increased 34 percent from 2012 to 2022. By 2040, the 65+ demographic is expected to increase from 17 percent of the population to 22 percent.

The graying U.S. populace is driving demand for senor living facilities that provide varying levels of assistance. Housing experts estimate a need to deliver more than 42,000 new senior housing units annually to meet demand. Higher demand, plus factors like inflation and rising operating expenses, are leading to an overall cost increase for senior housing. Recent reports show increases of 5 percent or more year-over-year.

CCRCs are part of the senior housing mix, but lifestyle and cost factors mean they aren’t right for everyone. In addition to CCRCs, there are housing arrangements available to seniors that may cost less while still providing tax advantages.

• Aging in place with home modifications: If you make home modifications for medical reasons (e.g., installing a ramp due to limited mobility), the costs may qualify as deductible medical expenses, subject to the 7.5 percent AGI threshold. Some federal and state programs, such as the Older Adult Home Modification Program, also give tax credits to seniors or individuals with disabilities who make home modifications to improve accessibility.
• Assisted living facility: A portion of assisted living expenses may be deductible as medical expenses if the resident is considered “chronically ill” by the IRS and requires assistance with activities of daily living (ADLs) like bathing, dressing, and toileting.
• Memory care facility: The resident of a memory care facility who meets IRS chronic illness criteria may qualify for the medical expense deduction. Deductible expenses might cover nursing services, medication management, therapy, and personal care services. Some CCRCs have memory care units, and residents of these units may be able to deduct a portion of their fees.
• Independent living communities: Independent living facilities are usually considered housing, not health care facilities, so their costs are generally not deductible. However, if the community provides some medical services, those specific health care costs might be deductible.
• Dependent Care Credit: Those who pay for assisted living for a parent or other qualifying relative might be eligible for the dependent care credit if they meet certain dependency requirements.

Choosing the right living arrangement is a major decision for seniors that impacts their long-term health, style of living, and finances and requires planning ahead, sometimes years in advance. Rising costs can make it difficult for older Americans, especially those with fixed incomes, to afford senior housing, but tax breaks may help to make CCRCs and other arrangements more affordable.

Contact a local elder law attorney to discuss the different senior housing options available and whether you are eligible to deduct medical expenses associated with senior living from your taxes.