Many Americans benefit from the tax advantages of saving for retirement. When retirement comes there are some smart choices you can make to keep those tax advantages coming. Living in a retirement community may be one of those choices.
Here are four things to consider that could provide tax advantages to living in a retirement community.
1. Many Fees May be Considered Medical Expenses
The IRS allows deductions for medical expenses
that exceed 7.5 percent of total annual income (for seniors over 65 until December 1, 2016). Many retirement community fees and services can be considered medical expenses. A 2012 report sponsored by the American Seniors Housing Association advised caution
. Medical expenses includes “qualified long-term care services” but that should be used cautiously for out-of-hospital settings like a retirement community.
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2. Room and Board May Be Deductible, But Not Always
If the primary reason you are choosing retirement community living is medical, then chances are you can deduct room and board. An American Seniors House Association report
on the issue clarifies if the reason for living in a retirement community is based on “family considerations,” food and lodging are not deductible tax expenses.
3. That Big Entrance Fee
While that big entrance fee can be listed as a deduction, be careful to consider your choice on this deduction carefully if the fee is considered refundable. According to U.S. News and World Report, the entrance fees at many Continuing Care Retirement Communities are refunded. If that is the case, you or your estate may be liable to return at least a portion of that tax deduction.
4. Tax Breaks for Your Kids
U.S. News and World Report advised family members
and children of people moving into a retirement community may be eligible for the same tax advantages if they are providing the major support of their parent.
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