When researching your senior living options, there’s a lot to consider beyond just monthly expenses. To ensure your nest egg lasts as long as possible, tax planning for retirement is a key part of your overall financial strategy. Let’s explore potential retirement tax deductions — including the benefits of moving to a Life Plan Community like Vista Point at Fairview — that could help you keep more money in your pocket and away from the IRS. You can also read about the property tax-free benefits of Vista Point here.

Tax Benefits of Senior Living

One of the lesser-known Life Plan Community tax perks is the potential to deduct a portion of your entrance fee and monthly fees as prepaid medical expenses.

For these costs to be tax-deductible, a portion of both the entry and monthly fees must be designated by the community as pre-paid health care expenses. It’s also important to note that only the non-refundable portion of the entry fee can be used for tax deduction purposes. Any refundable portion is excluded from the deductible amount. If you deduct part of the entry fee that is later refunded through a “return of capital” contract, that refunded portion could become taxable income in the future.

These deductions are available on a “use it or lose it” basis, meaning you’ll need to plan your taxable income carefully each year to maximize your benefit. Additionally, if your children cover all or part of the entry fee, they may also be eligible to claim a tax deduction.

Selling Your Current House

When it comes time to sell your home, there’s a good chance its value has increased significantly. If so, you may be subject to capital gains tax on the profit. The amount you owe depends on several factors, including:

• Your income tax bracket
• Your marital status
• How long you’ve owned the home
• Whether it was your primary residence, a second home, or an investment property

However, there are ways to reduce or avoid capital gains taxes—especially if the home was your primary residence. You can exclude up to $250,000 in profit if filing as a single taxpayer, or up to $500,000 if married filing jointly. You may also be able to defer capital gains taxes by using the equity to purchase another residence, including a home in a senior living community.

Moving Expenses as a Tax Deduction

Unfortunately, you can’t currently deduct moving expenses on your federal tax return. However, some states — such as Connecticut — may allow deductions for moving expenses on their state income tax returns, if you meet specific requirements.

Talk to a Tax Professional

If you’re planning to move to a community like Vista Point in the same year you sell your house, you could be in a great position to maximize your retirement tax deductions. Because tax laws change frequently, it’s crucial to consult a qualified tax professional to help you analyze your individual situation and plan accordingly.

Explore the Tax Advantage of Vista Point

As the only nonprofit Life Plan senior living community in Southeastern Connecticut that combines a vibrant lifestyle with breathtaking waterfront views, Vista Point helps you enjoy retirement to the fullest—while maximizing the value of your financial investment.

To learn more, call (860) 968-VIEW (8439) or contact us here.