Can I deduct a portion of a CCRC Entrance Fee as prepaid medical expense?

[robertburt1]

CCRC means Continuing Care Retirement Community.

[KrisD15]

That depends. 

If the CCRC is similar to a nursing home-

YES, IF the cost would be considered Medical Expense because the reason for the lodging is the nursing care provided, and not just a personal convenience.

NO, IF the fee covers lodging that would be attained strictly as a personal convenience ( in which case only the cost associated with medical care would be allowed) 

If the Entrance Fee is considered "Prepaid" because it crossed tax years (paid in 2022 for service to be received in 2023) 

YES, IF the expenses will be incurred in a reasonable amount of time after payment. 

If the Entrance Fee is considered "Prepaid" because it is an Advance Payment for Lifetime Care.

YES, IF this payment is an Advance Payment for Lifetime Care.

According to the IRS:

“You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. Don't include the cost of meals and lodging if the reason for being in the home is personal. You can, however, include in medical expenses the part of the cost that is for medical or nursing care.”

“You can include in medical expenses a part of a life-care fee or “founder's fee” you pay either monthly or as a lump sum under an agreement with a retirement home. The part of the payment you include is the amount properly allocable to medical care. The agreement must require that you pay a specific fee as a condition for the home's promise to provide lifetime care that includes medical care. You can use a statement from the retirement home to prove the amount properly allocable to medical care. The statement must be based either on the home's prior experience or on information from a comparable home.”

[RettopII]

Thanks, I will deduct the designated portion of the CCRC entrance fee, but where/how do I do it in TurboTax?

[Critter-3]

It is considered a medical expense like doctor fees and insurance costs. 

[AmyC]

Critter-3 is correct, it will be entered under medical expense. In your return:

go to deductions and credits. 

Scroll down to Medical. 

Locate Medical Expenses, start/ edit.

Reference: Publication 502, Medical and Dental Expenses

[cjdipietro]

what attachment to return is required show "medical expense portion of continuing care monthly service fee"?

[Opus 17]

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@cjdipietro wrote:

what attachment to return is required show "medical expense portion of continuing care monthly service fee"?

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You don't need to attach proof to your tax return, but keep such proof for at least 3 years after you file in case of audit. 

[Darel]

Where do I report the CCRC entrance fee in Turbo Tax?

[RettopII]

I moved to a CCRC in 2022.  For my TY2022 return I entered the fee amount on Line 11 ("Other medical and dental expenses:") of the Schedule A Medical Expenses Worksheet as "Advance Pmt for Lifetime Care portion of CCRC Entrance & Monthly Fees".  The CCRC administration provided the figures.

[user17723954851]

where does this go in the software. can't find it.

[MonikaK1]

If any portion of fees paid relating to a continuing care community qualify as medical expenses, you would enter them in Deductions & Credits, under medical expenses. 

 If you, your spouse, or your dependent is in a nursing home or other facility primarily for medical care, then the entire nursing home cost (including meals and lodging) is deductible as a medical expense.

If the primary reason for entering the facility isn't to obtain medical care, only the portion of the fees directly spent on medical treatment are deductible. Meals and lodging wouldn't be deductible.

See this TurboTax Help Article for more information.

In addition, you would only be able to get a deduction for Medical Expenses if the total of the qualified expenses exceeds 7.5% of your Adjusted Gross Income. For example, if your AGI is $50,000, the first $3,750 of qualified expenses (7.5% of $50,000) don't count. You also need enough total itemized deductions to exceed your standard deduction.

See also this interactive interview Can I Deduct My Medical and Dental Expenses? at the IRS website.

@user17723954851