Updated August 3, 2026. Quick answer: yes, part of it can be. The IRS allows a medical-expense deduction for the portion of a life-care fee — entrance fee or monthly fee — that is properly allocable to medical care. The community supplies the percentage; the deduction is yours to substantiate, and it only helps if you itemise and clear the 7.5% floor.
What the IRS actually says
From Publication 502, under Lifetime Care — Advance Payments: “You can include in medical expenses a part of a life-care fee or founder’s fee you pay either monthly or as a lump sum under an agreement with a retirement home.”
On how much: “The part of the payment you include is the amount properly allocable to medical care. The agreement must require that you pay a specific fee as a condition for the home’s promise to provide lifetime care that includes medical care.”
And on proving it: “You can use a statement from the retirement home to prove the amount properly allocable to medical care. The statement must be based either on the home’s prior experience or on information from a comparable home.”
Read that last sentence carefully, because it is the one people lean on without meeting. The statement must rest on the home’s prior experience or data from a comparable home. A percentage with nothing behind it is not what the publication describes.
The two limits that decide whether any of it helps
26 U.S.C. 213(a) permits deducting medical expenses that ‘exceed 7.5 percent of adjusted gross income’. The 7.5% floor was made permanent by Pub. L. 116-260 and is confirmed current for tax year 2026. Itemising on Schedule A is required.
So the deduction is worth nothing to someone taking the standard deduction, and worth less than it appears to someone with a high AGI. Run the arithmetic before letting it influence the decision — it is frequently presented as a headline benefit and is frequently worth nothing to the person hearing it.
That said, in the year a large entrance fee is paid, the allocable medical portion can be substantial enough to clear the floor by itself. It is the one year where the numbers may genuinely work.
What we could not verify, and are therefore not citing
Rev. Rul. 75-302 (percentage set from the facility’s records of average medical-care use) and Rev. Rul. 93-72 (limits current-year deduction of amounts allocable to future years’ care) could NOT be read in IRS primary text – pre-2003 bulletins are not in the online full-text archive. Both are corroborated only through a secondary commercial tax-research summary. The page states this limit rather than citing them as if verified.
We are naming that limit rather than reciting ruling numbers we did not read. The operative guidance above — Publication 502 and section 213 — was read directly.
Where this goes wrong
- Deducting a percentage the community supplies without the underlying ‘prior experience’ or ‘comparable home’ support Publication 502 requires.
- Deducting the whole entrance fee in the year paid rather than the portion allocable to that year.
- Confusing this with the separate nursing-home rule in Publication 502, where all costs including meals and lodging are deductible if the availability of medical care is the principal reason for being there. Different test, different facts.
- Forgetting the itemisation requirement and the 7.5% floor, which can erase the benefit entirely.
The third one is worth dwelling on: the nursing-home rule in the same publication is much more generous, and it applies to a different fact pattern. Someone in independent living in a CCRC is not in that situation.
This is a genuinely good question for a preparer, because the figures are large and the substantiation requirement is specific. Take the community’s letter with you and ask what supports it. Which contract you have affects how much of the fee is for care at all.
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General information drawn from IRS, Medicare, HUD and state statute and regulation, not legal, tax or financial advice. Continuing-care law is state law and differs materially between states; every figure here is year-labelled and every source named so you can check it against your own contract. Read your own signed agreement before relying on any general description, including this one.