The Benefits of Life Care: Federal Income Tax Deductions
Pennswood Village is a proud continuing care retirement community that offers residents a maintenance-free lifestyle and a full continuum of healthcare services, all covered under a Life Care contract. But, what is a Life Care contract?
A Life Care contract is an agreement between a resident and the community that covers most future healthcare expenses. It is the most comprehensive level of healthcare coverage available in a retirement community. With this contract, residents pay a one-time entry fee, as well as a monthly service fee, that covers everything from campus maintenance and dining to amenity upkeep, utilities and programing. The cost of a Life Care contract is largely dependent on both the floor plan and contract type you select.
Life Care allows residents to have peace of mind, and feel secure in their futures, knowing that their monthly service fees remain stable, regardless of the healthcare services they may receive. Monthly service fees are subject to yearly increases to account for inflation, but you’ll never be surprised by unexpected expenses, even if your healthcare needs change. You’ll know when, where and how you’ll receive healthcare services if you are to ever need them – and know exactly what your costs will be.
A significant advantage of Life Care involves the tax benefits. Many people are concerned about the upcoming implications of the new tax bill this year, especially for people who choose to deduct prepaid healthcare expenses from their income tax.
Fortunately, the law that allows out-of-pocket healthcare costs to be deducted remain in the new tax plan. People may still deduct out-of-pocket healthcare costs that exceed 7.5% of their adjusted gross income — which includes both the entrance fee and the monthly service fee of a Life Care contract.
This tax deduction can be a huge benefit to residents who opt for a Life Care contract and help to save thousands of dollars in tax costs each year. Because your monthly service fee covers the cost of your apartment home, campus maintenance, dining, home maintenance, utilities, amenities and additional community services, your monthly living expenses are essentially tax deductible, as opposed to paying for each of these in your current home without a tax benefit.
On top of these tax benefits, you’ll have peace of mind throughout your retirement, with a predictable financial future and a maintenance-free lifestyle. If you would like to learn more about the tax benefits of a Life Care contract, and see an example broken down, download our free white paper about the benefits of Life Care at Pennswood.