Guest Expert: Larry Pon, CPA and Brad Breeding, CFP®Tax Deductions and Strategies for Clients in Continuing Care Retirement Communities (CCRCs)
Presenters: Larry Pon, CPA/PFS, CFP®, EA, USTCP, AEP® and Brad Breeding, CFP®Host: Tom Dickson, Fin...
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Subscribe NowTax Deductions and Strategies for Clients in Continuing Care Retirement Communities (CCRCs)
Presenters: Larry Pon, CPA/PFS, CFP®, EA, USTCP, AEP® and Brad Breeding, CFP®
Host: Tom Dickson, Financial Experts Network
Original Air Date: September 30, 2026
Run Time: Approximately 1 Hour, 27 Minutes
Topic Area: CCRC Planning, Retirement Planning, Medical Expense Deductions, Tax Planning
Key Takeaways
Understanding CCRC Contract Structures
Brad began by explaining what separates a CCRC or Life Plan Community from many other senior-living arrangements.
A typical CCRC provides access to a continuum of care—often including independent living, assisted living and skilled nursing—under one continuing care agreement. Residents generally receive priority access to these services. Some communities may also provide financial assistance if residents outlive their assets, although terms vary by facility.
Understanding the contract is critical because CCRCs can structure both entry fees and ongoing care costs very differently.
Brad described three common monthly-care models:
Fee-for-Service (Type C): Residents generally pay the full cost of additional care as it is needed.
Life Care (Type A): Residents typically pay more upfront or in monthly fees, but future care is included or substantially covered, providing greater predictability.
Modified (Type B): A hybrid approach in which residents receive a specified amount of care or a discount on future care costs.
For advisors comparing communities, Brad emphasized looking beyond the initial price and evaluating lifetime costs, predictability and the financial consequences of needing additional care.
The CCRC Medical Expense Deduction
Larry explained that medical expenses are generally deductible as an itemized deduction on Schedule A to the extent qualifying expenses exceed 7.5% of AGI.
IRS Publication 502 confirms both the 7.5% threshold and a special rule for lifetime-care arrangements. A portion of a life-care or founder's fee paid monthly or as a lump sum may be included as a medical expense when it is properly allocable to medical care and the agreement requires payment in exchange for lifetime care that includes medical care.
This means the entire CCRC payment isn't automatically deductible.
Instead, the deductible amount generally represents the portion properly attributable to medical care.
Documentation Matters
Brad explained that established CCRCs commonly provide residents with an annual statement or allocation letter showing the portion of fees associated with medical care.
That documentation can be especially important because the allocation may change from year to year based on the facility's healthcare expenditures.
The IRS specifically recognizes that a retirement home's statement can be used to establish the portion properly allocable to medical care when the allocation is based on the home's experience or comparable information.
Advisors should encourage clients to retain the facility's allocation letter, invoices and other supporting documentation with their tax records.
Entry Fees Can Create a Major Planning Opportunity
CCRC entry fees can reach hundreds of thousands of dollars, creating the possibility of a substantial medical expense deduction in the year of entry.
Larry emphasized an important planning issue: a medical expense deduction generally doesn't carry forward simply because the client couldn't fully benefit from it in the year paid.
That makes advance planning critical.
Instead of learning about a client's move during tax preparation the following spring, the advisor and CPA should ideally know about it beforehand.
Potential strategies discussed during the webinar included:
Larry specifically highlighted Roth conversions as one possible way to take advantage of an unusually large deduction that might otherwise provide limited additional tax benefit.
The appropriate strategy depends on the client's complete tax situation and should be modeled carefully.
Not Every Entry Fee Is Deductible
The contract terms matter enormously.
Larry and Brad discussed arrangements where 90% of the entry fee is unconditionally refundable. If the arrangement is structured as a loan—for example, through a promissory note—the payment isn't treated the same as a nonrefundable lifetime-care fee for purposes of the medical deduction discussed in the webinar.
They also noted that an entry fee may not generate a medical deduction if the facts show that medical services are funded entirely from monthly charges rather than the entrance fee.
Their repeated advice was simple:
Read the contract.
Monthly Fees May Also Generate Deductions
The tax opportunity doesn't necessarily end with the initial entry fee.
A portion of ongoing monthly CCRC fees may also qualify as medical expenses when properly allocable to medical care under the arrangement.
The facility's annual allocation statement becomes particularly important here. For example, if the CCRC determines that a certain percentage of qualifying monthly charges represents medical care, that percentage may be included with the client's other eligible unreimbursed medical expenses.
One particularly important point from Brad: a resident may potentially qualify for the CCRC medical allocation even while living independently, because the payment is being made under the broader continuing-care arrangement.
The Potential Long-Term Impact
Brad demonstrated the impact using his CCRC financial modeling software.
In one hypothetical couple's projection, incorporating the tax benefits associated with the CCRC's qualifying entry and monthly fees increased projected ending assets by approximately $400,000 over their lifetime compared with the scenario that ignored those tax benefits.
The example was illustrative rather than a guaranteed result, but it demonstrated why tax treatment shouldn't be overlooked when comparing CCRC costs.
Brad also emphasized that the potential deduction depends heavily on both the care contract and entry-fee refund structure.
Don't Ignore the CCRC's Financial Health
The webinar went beyond tax planning to address an equally important question:
Can the CCRC fulfill its long-term promises?
Brad recommended reviewing the facility's disclosure statement, residency contract and audited financial statements. For nonprofit organizations, Form 990 may provide additional information.
Important considerations can include:
Brad noted that refundable entry fees can appear as substantial liabilities on a CCRC's balance sheet, so advisors need to understand the organization's business model rather than evaluating a single financial number in isolation.
Don't Forget HSAs
Larry also highlighted Health Savings Accounts (HSAs) as an important retirement medical-planning tool.
Rather than automatically spending HSA balances during working years, clients who can afford to pay current medical expenses from other resources may consider allowing HSA assets to remain invested for future qualified medical expenses.
The webinar also discussed the qualified HSA funding distribution, which generally allows an eligible individual to make a once-in-a-lifetime direct transfer from an IRA to an HSA, subject to the applicable HSA contribution limit and other requirements. IRS guidance confirms that the transfer isn't included in income, isn't deductible and is subject to an eligibility testing period.
Practical Questions for Advisors
When a client is considering a CCRC, advisors should look beyond whether the client can simply "afford" the entry fee.
Consider asking:
Brad's MyLifeSite MoneyGage Net tool was demonstrated as one approach to modeling CCRC contracts, expenses, tax benefits and long-term financial projections.
The Bottom Line
CCRC planning involves much more than choosing a residence.
The contract structure, entry-fee refund provisions, future cost of care, potential medical deductions and financial strength of the community can all materially affect a client's retirement plan.
For advisors, one of the biggest opportunities is simply becoming involved before the client signs the contract or pays the entry fee.
A substantial CCRC medical deduction may create a valuable one-year tax-planning opportunity, but capturing that opportunity requires coordination among the client, financial advisor and tax professional before year-end.
Fact-Checked Resources
IRS Publication 502 – Medical and Dental Expenses: Covers the 7.5% AGI threshold, qualified medical expenses, long-term care and the special rules for advance payments for lifetime care.
IRS Publication 969 – Health Savings Accounts: Covers HSA eligibility, qualified expenses and qualified HSA funding distributions from IRAs.
IRS Form 8889 Instructions: Provides additional guidance on HSA contributions, distributions and the rules governing qualified HSA funding distributions.
Compliance Note
This summary is for educational purposes and reflects concepts discussed during the webinar. CCRC contracts and medical-expense deductions are highly fact-specific, and state regulation of CCRCs varies. Tax results depend on the resident's contract, facility allocation, AGI, other medical expenses and overall tax situation. Clients should consult qualified tax, legal and financial professionals before making decisions based on potential deductions.
