medical deduction for CCRC entry fee

[flretiree]

Where do I identify a large medical tax deduction of $100,000 for Continuing Care Retirement Community (CCRC) entry fee?

[DoninGA]

IRS Publication 502 Medical and Dental Expenses - https://www.irs.gov/pub/irs-pdf/p502.pdf

Lifetime Care—Advance Payments
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.

Health care insurance premiums and other medical expenses that you paid with out of pocket funds are an eligible medical expense that you can deduct using Schedule A for itemized deductions. However, only your total medical expenses that are greater than 7.5% of your  Adjusted Gross Income (AGI) can be deducted. Your total itemized deductions reported on Form 1040 Schedule A must be greater than the standard deduction for your filing status to have any tax benefit.

Standard deductions for 2018

• Single - $12,000 add $1,600 if age 65 or older
• Married Filing Separately - $12,000 add $1,300 if age 65 or older
• Married Filing Jointly - $24,000 add $1,300 for each spouse age 65 or older
• Head of Household - $18,000 add $1,600 if age 65 or older

To enter your medical expenses -

• Click on Federal Taxes (Personal using Home and Business)
• Click on Deductions and Credits
• Click on I'll choose what I work on (if shown)
• Scroll down to Medical
• On Medical Expenses, click the start or update button

Or enter medical expenses, sch a in the Search box located in the upper right of the program screen. Click on Jump to medical expenses, sch a

[flretiree]

Thanks for your reply.  I think I should be able to add an explanation for the deduction like "Medical expense portion of entry fee for  Continuing Care Retirement Community".   Is there a place in Turbo Tax to enter a statement like this?  It seems like the IRS would require some explanation for an over $100,000 medical deduction.   I don't want to be audited.

[DoninGA]

The only way to add an explanation for an entry on a form or schedule is attach the explanation to a printed and mailed tax return.  It cannot be included with an e-filed return.

[flretiree]

Do you think I could get away with claiming a deduction of over $100,000 without some kind of explanation?

[DoninGA · Accepted solution]

Yes, you can enter the deduction on your tax return without an explanation.  If the IRS has an issue with the deduction they will contact you by mail seeking proof for that deduction.

[flretiree]

Thanks for your advice.  I'll either use TurboTax and file my return electronically and respond to any IRS questions if asked or mail in my TurboTax paper return with the medical deduction documented on Form 8275.

Being able to ask questions like this is a great service by TurboTax.   Thanks again.

[DoninGA]

You are welcome.  And Good Luck!

[2stokeTommy]

What description do you enter to claim medical cost. Can you change method each year?

[VictoriaD75]

Do your best to describe the expense you are claiming. For example, doctor, hospital, physical therapy, dentist, etc. You do not need to be exact from year-to-year, but if you are claiming the same type of expenses, the description should be similar.

Qualified medical expenses in excess of 7.5% of adjusted gross income (AGI) are deductible as itemized deductions. To enter these expenses, follow these steps:

• From the Federal menu, click on Deductions & Credits
• Expand the menu for Medical
• Click Start/Revisit next to Medical Expenses
• Enter the information on the screens that follow

Qualified Medical Expenses

[Opus 17]

I don’t know what you mean by change the method. The fact is, that even though TurboTax asks many granular questions about types of medical expenses, all of your claimed medical expense deductions go on one line on the tax form. So it doesn’t really matter what you put in TurboTax, except that if you are audited, listing the granular items in TurboTax might help you to assemble the records that you need for your audit.  Of course, you should always be keeping accurate records of your deductions because, if you are audited, you don’t get credit for any deduction that you can’t prove.

[MarkFred]

My mother-in-law entered into a "life care contract" with a Continuous Care Retirement Community & made a lump-sum payment of several hundred thousand dollars.  She also makes a monthly payment, which includes rent, meals & medical care.  We have received paperwork, which details the tax deductability of both of these items.  My question is, can we stretch the deductability of the lump-sum payment of over five years??  She doe not have much in the way of income to take advantage of this significant deduction.