Yes, CCRC fees are tax deductible in part. The IRS lets you deduct the share of your continuing care retirement community entry fee and monthly fees that the community allocates to medical care, provided you itemize on Schedule A and your total medical expenses for the year clear 7.5% of your adjusted gross income.1Internal Revenue Service. Publication 502 – Medical and Dental Expenses The deductible share commonly falls somewhere between 15% and 45% of what you pay, depending on your contract and the community’s operating budget.
How the Medical Portion Is Calculated
A CCRC employs nurses, runs a health center, and keeps medical staff and equipment available to every resident, even those living independently. The IRS accepts that a portion of your fees funds this medical capacity, and that portion is what you can deduct.
Each year the community divides its qualified medical costs (nursing and medical staff salaries, medical supplies, health center operations) by its total operating expenses to produce a percentage. You apply that percentage to your fees to find the deductible amount. The IRS accepts the calculation when it reflects actual operating experience, and the community must give you a written statement showing the allocable percentage.1Internal Revenue Service. Publication 502 – Medical and Dental Expenses
Contract type drives most of the variation. Type A (lifecare) contracts bundle extensive future medical care into the fees and tend to produce the highest deductible percentages. Type B (modified) contracts cover a limited number of care days at reduced rates and land in the middle. Type C (fee-for-service) contracts charge market rates when care is actually needed, so less of your ongoing fees fund medical operations and the deductible share is smallest.
Entry Fee: Why Refundability Matters
The upfront entry fee (also called a founder’s fee or entrance fee) counts as a prepaid medical expense, deductible in the year you pay it, when your contract requires the fee as a condition of the community’s promise of lifetime care that includes medical services.1Internal Revenue Service. Publication 502 – Medical and Dental Expenses
Only the non-refundable portion enters the deduction. If your contract refunds 90% when you leave or pass away, only 10% of the entry fee is eligible. Multiply that non-refundable amount by the community’s medical percentage to get the deduction.
An example makes the difference clear. On a $400,000 entry fee with a 90% refund and a 35% medical allocation, the deductible medical expense is $400,000 × 10% × 35% = $14,000. Under a fully non-refundable contract, the same math on the full $400,000 produces $140,000 in first-year deduction. A refundable contract may feel financially safer, but it sharply reduces the tax benefit. If the deduction matters to your planning, look hard at refundability before you sign.
Monthly Fees
The same medical percentage applies to your monthly service fees. If the community’s allocation is 35%, then 35% of your monthly payments for the year counts as a qualified medical expense, and this deduction recurs every year you live there.
Monthly fees commonly run from roughly $2,500 to more than $4,000, depending on the community and unit. At a 35% allocation on $3,500 per month, that’s about $14,700 in deductible medical expenses from monthly fees alone. Combined with the entry fee deduction in your first year, the total can be large enough to clear the AGI threshold below.
The 7.5% AGI Floor and the Itemizing Question
CCRC medical expenses follow the same rules as all other medical deductions. You must itemize on Schedule A, and only the amount above 7.5% of your adjusted gross income counts.2Internal Revenue Service. Topic No. 502, Medical and Dental Expenses On a $100,000 AGI, the first $7,500 of medical expenses produces no deduction. Everything above $7,500 does.
Itemizing only helps when your total itemized deductions exceed the standard deduction. For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly, and taxpayers 65 and older get an additional amount on top of that.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
The One Big Beautiful Bill Act adds a further enhanced deduction for seniors for tax years 2025 through 2028: an extra $4,000 for taxpayers 65 and older, or $8,000 if both spouses qualify on a joint return. It phases out for single filers with modified AGI above $75,000 and joint filers above $150,000.4Internal Revenue Service. Check Your Eligibility for the New Enhanced Deduction for Seniors Because most CCRC residents are over 65, the combined standard deduction can easily top $20,000 for a single filer. Your CCRC medical expenses plus any other itemized deductions need to beat that number before itemizing saves you anything.
The practical result: the year you pay a non-refundable entry fee is almost always the year itemizing wins, because that single payment can generate tens of thousands in deductible medical expenses. In later years, when only the monthly-fee medical portion and your other medical costs are in play, the math tightens and many residents find the standard deduction comes out ahead.
Long-Term Care Insurance Reimbursements
If long-term care insurance reimburses any of your CCRC care costs, you must subtract those reimbursements from your deductible medical expenses. The IRS does not let you deduct expenses that insurance already covered.1Internal Revenue Service. Publication 502 – Medical and Dental Expenses This applies whether the insurer pays you directly or pays the CCRC on your behalf.
Premiums you pay for a qualified long-term care policy also count as deductible medical expenses, but only up to age-based annual limits set by federal law.5Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses For 2026, those inflation-adjusted caps range from $500 for policyholders age 40 and under to $6,200 for those over 70. These premiums add to your other medical expenses, including the CCRC medical portion, before the 7.5% AGI floor is applied.
When an Adult Child Pays a Parent’s CCRC Fees
Family members who pay CCRC fees for a parent face two separate tax questions: whether they can deduct the medical portion, and whether the payment creates a gift tax problem.
For the medical deduction, you can deduct medical expenses paid for a parent only if the parent qualifies as your dependent for tax purposes. The parent generally doesn’t need to live with you, but you must provide more than half of their financial support for the year. If the parent’s income is too high for them to qualify as a dependent, no one gets the deduction: the parent didn’t pay, and the child can’t claim it.
The gift tax answer is friendlier. Federal law excludes from gift tax any amount you pay directly to a medical care provider on someone else’s behalf, with no dollar limit.6eCFR. 26 CFR 25.2503-6 – Exclusion for Certain Qualified Transfer for Tuition or Medical Expenses The payment must go straight to the CCRC, not to the parent to pass along, and only the portion qualifying as medical care under the tax code is excluded. The housing and amenity portion doesn’t qualify and could be treated as a taxable gift if it exceeds the annual exclusion.
If a Deducted Entry Fee Is Later Refunded
A refundable entry fee is a financial asset. If you move out or pass away, the refundable portion returns to you or your estate, and that carries tax consequences.
If you claimed a medical deduction on any portion of the entry fee and that portion is later refunded, the refund is taxable income in the year you receive it. This is the general tax benefit rule: money that previously reduced your taxes gets recaptured when it comes back. A spouse or estate receiving the refund faces the same treatment. Keep records of the original deduction so you can correctly report the taxable portion of any refund years later.
Using HSA Funds Instead
If you have a health savings account balance, you can use those funds to pay the medical portion of your CCRC fees tax-free. The medical portion of CCRC costs qualifies under the same definition of medical care that governs HSA distributions.5Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses You cannot double-count, though: expenses paid with HSA funds don’t also count toward your itemized medical deduction, because the HSA distribution already delivered a tax benefit.
Most CCRC residents are on Medicare, which stops new HSA contributions, but any balance built up during your working years remains available for qualified medical expenses indefinitely.
Documentation to Keep
The IRS can ask you to substantiate every dollar. The key document is the annual statement (sometimes called a tax letter) your community provides showing the percentage of fees allocated to medical care. Request it each year, because the percentage shifts as the community’s costs shift.
Hold onto the continuing care contract itself. It establishes that the entry fee was a condition of the community’s promise of lifetime care including medical services, which is the legal basis for treating the fee as a prepaid medical expense.1Internal Revenue Service. Publication 502 – Medical and Dental Expenses Keep receipts or bank records for every entry fee and monthly fee payment, and document long-term care insurance reimbursements separately so you can properly reduce your deductible amount.