The larger your AGI the SMALLER the amount of your entrance fee that you can deduct. Reworking my original example, let's say your AGI is $500k instead of $100k. Instead of $92.5k of the $200k entrance fee being deducted now (200k*0.5-500k*.075) $62.5k instead of $92.5k is deductible. All of this just points back to what I said in my original post. It is convoluted and depends on many different variables of each individual considering CCRA. To make the best decision for you, you will have to look deeply at the details particular to your situation and not depend on any sort of generalizations. In summary, details matter. If you aren't wiling/able to do the detailed analysis of your particular deal, hire a professional.
There are a few different ways that the entrance fees may be structured. Some are never refundable. Some are amortizing entrance fees, specify a period during which the entrance fee can be refundable to the resident or the resident's estate on a declining basis. Some are always refundable. And finally, some are a blend of the above. You are correct that only the non-refundable portion of an entrance fee may be considered for an itemized deduction. And to be more specific, only that portion of the non-refundable entrance fee that is a prepaid medical expense and exceeds 7.5% of your Adjusted Gross income in the year that you paid it is tax deductible. But it might not even be worth it to claim this deduction. As an example, let's say that you pay a $200k total non-refundable entrance fee of which your CCRC tells you 50% of that is prepaid medical expenses and your AGI for that year was $100k. In that case only $42,500 $92,500 (200k*0.5-100k*.075) is deductible and then only if you itemize instead of taking the standard deduction. For a couple, both over 65, in 2025 the standard deduction is 31,500 + 3,200 +12,000 = $46,700 and thus there is no an advantage to itemizing for this example. *edited 7/11 to fix math error!
If the entry fee was claimed as a medical expense on your tax return the year you paid it and that deduction resulted in a reduced taxable income in that year, then any portion of that expense that is later recovered may be considered as income and taxable to either you or your estate. It is a bit convoluted to figure out the amounts so either do some deep research or higher a tax pro.
A key concept with bond funds is duration. Bond duration is a measure of a bond's price sensitivity to changes in interest rates. Duration quantifies the percentage change in a bond's price for a 1% change in interest rates. If a bond fund has a duration of 6 years, typical for an intermediate term bond fund, and interest rates rise by 1%, the fund's price is expected to decrease by approximately 6%. A bond fund with a high duration is a warning that the price drop with increasing interest rates will be large. If you can't tolerate these drops, don't hold high duration bond funds. Instead stay with short-term funds with durations typically close to 2 years. If that is still too much, then there are some ultra-short-term funds with durations of less than 1 year. After that, money markets, CD's or if you have the skills and time build your own short-term ladder of Treasury bills and/or bonds. *Edited 7/8 to fix typo's
The best story wins. Not the best idea. Not the right answer. Just whoever tells a story that catches people’s attention and makes them feel good. George Packer wrote: "The most durable narratives are not the ones that stand up best to fact-checking. They’re the ones that address our deepest needs and desires." This drives you crazy if you assume the world is swayed by facts and objectivity because it clearly isn't.
1. I started saving in 1984 when I finished collage. That’s forty-one years of ups and downs which has helped me know myself.
2. Specific purchases for sure. Going to Africa with my son was priceless.
3. Yes
4. I’m retired and yes.
5. What I have now is enough.
6. My family gives me my sense of purpose. I have the time to spend time with and help parents, kids and grandkids.
7. Spouse and kids will help me out when the time comes. LTCI and plenty of investments minimize the risk of depleted savings.
8. Wills, POA’s are in order. Investments have been simplified to just one traditional and Roth IRA’s each for the wife and I and one joint brokerage account. Everyone knows where the notebook is with all the necessary paperwork is. Already downsized and emptied the house.
Thanks for your answer. When money comes out of the general fund for anything it is impossible to determine which income source to the general fund provided that money. It could be money raised via public borrowing, or it could be general tax revenue. But whatever revenue source actually provides the money to transfer to SS, I agree with you that it increases the need for public borrowing.
To me the fact SS trust invested in bonds does not mean it is funded by general revenue and taxes.
The money to pay the interest on the SS bonds and to pay off the SS bonds comes from general revenue and taxes. You know this. Passing that money through the bookkeeping process of the bonds and the trust fund doesn't change that simple fact. Of course, feel free to ignore that simple fact.
Comments
Apparently, you did do "complicated" calculations!
Post: Bankruptcies in continuing care
Link to comment from July 11, 2025
The larger your AGI the SMALLER the amount of your entrance fee that you can deduct. Reworking my original example, let's say your AGI is $500k instead of $100k. Instead of $92.5k of the $200k entrance fee being deducted now (200k*0.5-500k*.075) $62.5k instead of $92.5k is deductible. All of this just points back to what I said in my original post. It is convoluted and depends on many different variables of each individual considering CCRA. To make the best decision for you, you will have to look deeply at the details particular to your situation and not depend on any sort of generalizations. In summary, details matter. If you aren't wiling/able to do the detailed analysis of your particular deal, hire a professional.
Post: Bankruptcies in continuing care
Link to comment from July 11, 2025
There are a few different ways that the entrance fees may be structured. Some are never refundable. Some are amortizing entrance fees, specify a period during which the entrance fee can be refundable to the resident or the resident's estate on a declining basis. Some are always refundable. And finally, some are a blend of the above. You are correct that only the non-refundable portion of an entrance fee may be considered for an itemized deduction. And to be more specific, only that portion of the non-refundable entrance fee that is a prepaid medical expense and exceeds 7.5% of your Adjusted Gross income in the year that you paid it is tax deductible. But it might not even be worth it to claim this deduction. As an example, let's say that you pay a $200k total non-refundable entrance fee of which your CCRC tells you 50% of that is prepaid medical expenses and your AGI for that year was $100k. In that case only
$42,500$92,500 (200k*0.5-100k*.075) is deductible and then only if you itemize instead of taking the standard deduction. For a couple, both over 65, in 2025 the standard deduction is 31,500 + 3,200 +12,000 = $46,700 and thus there isnoan advantage to itemizing for this example. *edited 7/11 to fix math error!Post: Bankruptcies in continuing care
Link to comment from July 10, 2025
If the entry fee was claimed as a medical expense on your tax return the year you paid it and that deduction resulted in a reduced taxable income in that year, then any portion of that expense that is later recovered may be considered as income and taxable to either you or your estate. It is a bit convoluted to figure out the amounts so either do some deep research or higher a tax pro.
Post: Bankruptcies in continuing care
Link to comment from July 9, 2025
A key concept with bond funds is duration. Bond duration is a measure of a bond's price sensitivity to changes in interest rates. Duration quantifies the percentage change in a bond's price for a 1% change in interest rates. If a bond fund has a duration of 6 years, typical for an intermediate term bond fund, and interest rates rise by 1%, the fund's price is expected to decrease by approximately 6%. A bond fund with a high duration is a warning that the price drop with increasing interest rates will be large. If you can't tolerate these drops, don't hold high duration bond funds. Instead stay with short-term funds with durations typically close to 2 years. If that is still too much, then there are some ultra-short-term funds with durations of less than 1 year. After that, money markets, CD's or if you have the skills and time build your own short-term ladder of Treasury bills and/or bonds. *Edited 7/8 to fix typo's
Post: Bond Conundrum
Link to comment from July 7, 2025
The best story wins. Not the best idea. Not the right answer. Just whoever tells a story that catches people’s attention and makes them feel good. George Packer wrote: "The most durable narratives are not the ones that stand up best to fact-checking. They’re the ones that address our deepest needs and desires." This drives you crazy if you assume the world is swayed by facts and objectivity because it clearly isn't.
Post: The great uninformed and misinformed population worries Quinn
Link to comment from April 23, 2025
1. I started saving in 1984 when I finished collage. That’s forty-one years of ups and downs which has helped me know myself. 2. Specific purchases for sure. Going to Africa with my son was priceless. 3. Yes 4. I’m retired and yes. 5. What I have now is enough. 6. My family gives me my sense of purpose. I have the time to spend time with and help parents, kids and grandkids. 7. Spouse and kids will help me out when the time comes. LTCI and plenty of investments minimize the risk of depleted savings. 8. Wills, POA’s are in order. Investments have been simplified to just one traditional and Roth IRA’s each for the wife and I and one joint brokerage account. Everyone knows where the notebook is with all the necessary paperwork is. Already downsized and emptied the house.
Post: Ask Me a Tough One
Link to comment from April 18, 2025
Thanks for your answer. When money comes out of the general fund for anything it is impossible to determine which income source to the general fund provided that money. It could be money raised via public borrowing, or it could be general tax revenue. But whatever revenue source actually provides the money to transfer to SS, I agree with you that it increases the need for public borrowing.
The money to pay the interest on the SS bonds and to pay off the SS bonds comes from general revenue and taxes. You know this. Passing that money through the bookkeeping process of the bonds and the trust fund doesn't change that simple fact. Of course, feel free to ignore that simple fact.Post: RDQ There is so much to rant about these days. Let’s go for the people who don’t believe facts-perhaps about Social Security
Link to comment from April 13, 2025
Several organizations have put out proposals to address the issues. Here's one from the Committee for a Responsible Federal Budget that includes an interactive tool to explore the options. The Reformer: An Interactive Tool to Fix Social Security The Government Accounting Office Put out a good report on options in August 2024 There Are Options for Reforming Social Security, But Action is Needed Now | U.S. GAO A little time with Google will find many more.
Post: RDQ There is so much to rant about these days. Let’s go for the people who don’t believe facts-perhaps about Social Security
Link to comment from April 12, 2025
The courtesy of reply would be appreciated.
Post: RDQ There is so much to rant about these days. Let’s go for the people who don’t believe facts-perhaps about Social Security
Link to comment from April 12, 2025