Understanding a Key Tax Break at Senior Communities

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At what point, if ever, does the monthly fee become fully deductible as medical expense? Local retirement residences have three levels of care: independent living, assisted living and hospitalization on the premises. When does a retirement residence become a "nursing home" with care needed 24/7. Is it the IRS definition of "chronically ill", that is: unable to perform at least two activities of daily living?

Lynn of NM 3:26PM April 14, 2013

Great information for so many. There are so many things to consider, logistics to take care of, and emotions to deal with when making a major move into senior community from a private home. It is almost overwhelming for a great majority. Articles like this can help those of us in the business, as well as helping to spread the word to friends and family. Thank you

Arlinda Babcock of AZ 9:20PM July 20, 2011

Seniors should pay close attention to how their CCRC provider uses entrance fees. In the past, a number of residents acting on information provided by Vi (formerly known as "Classic Residence by Hyatt") have had problems with the IRS, including audits.
One couple residing at Vi’s Glenview community filed a lawsuit against the US Treasury after the IRS denied their medical tax deduction refund. In 2007, a federal judge sided with the IRS and found that neither the couple, nor Vi executives, could provide evidence that any part of the couple’s entrance fee was used to pay medical expenses. You can read more about this issue and the judge's decision at virisks.org/medicaltaxdeduction.

Elliott M. of IL 2:31PM July 19, 2011

Great article. You did a good job communicating a fairly complex tax benefit. You are correct that many people don't consider this huge benefit when they are deciding about whether to stay in their own homes or move to a community. After residents move in, they are delighted to see that benefit each year, but even more delighted if they need those health services later and are not struggling to find $10,000 each month to pay for their long-term care needs.

Colleen Ryan Mallon of VA 8:19AM July 19, 2011