There are potential financial and tax benefits moving to a 62+ community.
According to the Northwest Multiple Listing Service Market Update, January 2017 continued as a “high velocity” market in the Puget Sound region, with inventory selling in 30 days or less and at an all-time low. For people over 60, this could be the perfect time to consider taking advantage of a seller’s market to downsize.
There are lots of financial and lifestyle choices available for people 62 and older, but one category of community comes with a tax advantage.
Continuing Care Retirement Communities (also known as a CCRC’s or LifePlan Communities) qualify with the IRS as a tax deduction on a percentage of the monthly fee. That’s because they consider it a pre-payment expense for health care.
To qualify, the community must be legally committed to providing health services. Because these communities take payments that represent the cost of future health care benefits, a portion of the payment entitles the resident to a tax deduction.
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The tax deduction varies with different CCRCs but is about 6 percent of the monthly fee. An example of a CCRC is Parkshore, located in Madison Park, Seattle.
For most people, living in a CCRC can actually save on monthly living expenses. That’s especially true for people selling high-value homes and moving to an upscale community that offers a long list of luxurious amenities.
If you’re currently living in a spacious waterfront home or on prime real estate, making the switch to having no property taxes, landscaping, housecleaning, utilities or house sitting services adds up fast. At a CCRC, all of this is taken care of — and you’ll get dining services, transportation, laundry, wellness programs and activities for one monthly fee that can start around $3,200 a month. A huge savings compared to managing a big home.
The pricing model of CCRC’s includes a one-time entrance fee plus a monthly fee after move-in. Entrance fees vary in price depending on the apartment size and quality of the community.
“There are a lot of reasons people choose to downsize,” Parkshore managing director Don Warfield says. “The biggest reasons to make the change are freedom, lifestyle and location.”
“At Parkshore, our entrance fees start at $350,000 which gives residents a home on the water, puts them steps away from great restaurants and services and the sandy beach of Madison Park. A waterfront home on Lake Washington today starts at a million dollars — so there’s a tremendous savings for these upscale homeowners to downsize, and the tax break makes it even better,” Warfield says.
A lot goes into the decision to sell your home and downsize. Where to begin? Warfield says, “I tell people to first consider the lifestyle they’re looking for, their budget and finally, their timing.
“I work with potential new residents for sometimes years before they actually move here. Good planners start early, get organized to pare down their possessions and sell the family home. With popular locations, it’s critical to get on a waiting list often years in advance. Planners like having the control to choose their new home rather than waiting and trusting their kids to make the decision for them.”
The waiting list cost is usually only $1,000 to $2,500, which means you’re on the priority list when availability comes up. Being on the list generally provides some social perks like dinner events, parties and the opportunity to get to know residents of the community before moving. The more popular the product, and the higher the quality of care, the longer the wait can be.
A lakefront tower in Seattle’s picturesque Madison Park neighborhood, Parkshore is an active, welcoming community with panoramic views of Lake Washington. We offer a full range of services to foster independent and healthy living.