Dear Liz:We are retired and living mainly on a pension, which covers our month-to-month needs. We own our house outright and are considering downsizing. When we do that, will the capital gain cause our Medicare premiums to go up two years later? If so, will it automatically go down again after one year?
Answer:A big-enough capital gain can trigger Medicare’s income-related adjustment amount, which are surcharges on your Part B and Part D premiums. As you note, there’s a two-year delay between the higher income on your tax returns and higher premiums.
If you’ve had a life-changing event — marriage, divorce, a spouse’s death or loss of income, for example — you can appeal the increase by filing formSSA-44. Otherwise, consider saving some of the home sale profits to cover your higher premiums for that one-year period.
FAQs
Answer: A big-enough capital gain can trigger Medicare's income-related adjustment amount, which are surcharges on your Part B and Part D premiums. As you note, there's a two-year delay between the higher income on your tax returns and higher premiums.
Will capital gains increase my Medicare premiums? ›
Income from your assets whether through IRA withdrawals or by dividends, interest and capital gains from non-IRA assets can make your social security taxable or increase your Medicare premiums.
Does selling my house affect Medicare premiums? ›
The sale of your home could affect your Medicare Part B and Part D premiums if it results in a significant capital gain that increases your modified adjusted gross income (MAGI) above certain thresholds.
Do capital gains count toward Irmaa? ›
Yes, since capital gains are included in MAGI, they can affect your IRMAA.
Does the 3.8% Medicare tax apply to capital gains? ›
Many investors selling real estate or other high value investments are often surprised to find out that their tax liability could be subject to an extra 3.8% surtax in addition to the applicable short-term or long-term capital gains tax rates.
Why did my Medicare premium increase so much? ›
If you're on Medicare or Medicare Advantage and your income rises above a certain threshold, the Social Security Administration adds an extra charge to the standard Plan B or Plan D premiums based on IRMAA, or the Income-Related Monthly Adjustment Amount.
Does selling a house count as income for Social Security? ›
Income limitations: Selling your home does not directly impact your eligibility for Social Security benefits. However, if you earn income from the sale, it could potentially affect the taxation of your benefits or eligibility for certain assistance programs.
Does inheritance affect Medicare premiums? ›
The short answer is no, but receiving a financial windfall could affect what you pay for coverage. Receiving an inheritance can have other affects on your personal finances, so it may be a good idea to speak with a financial advisor.
What income is used to determine Medicare premiums in 2024? ›
Medicare premiums are calculated using your Modified Adjusted Gross Income (MAGI) from your tax return for two years prior to the current year. For example, if you're paying premiums in 2024, these will be based on your 2022 MAGI.
Do capital gains count as income for Social Security taxation? ›
Furthermore, capital gains are not included in the income that Social Security uses to calculate the threshold. Also excluded are investment income, pensions, retirement account withdrawals, interest, and dividends.
IRMAA is determined by income from your income tax returns two years prior. This means that for your 2024 Medicare premiums, your 2022 income tax return was used. IRMAA applicability and amounts are recalculated annually.
How long do capital gains affect Medicare premiums? ›
Answer: A big-enough capital gain can trigger Medicare's income-related adjustment amount, which are surcharges on your Part B and Part D premiums. As you note, there's a two-year delay between the higher income on your tax returns and higher premiums.
Does everyone pay $170 for Medicare? ›
If you don't get premium-free Part A, you pay up to $505 each month. If you don't buy Part A when you're first eligible for Medicare (usually when you turn 65), you might pay a penalty. Most people pay the standard Part B monthly premium amount ($174.70 in 2024).
What income is used to determine Medicare premiums in 2025? ›
The income used to determine your Medicare premium IRMAA is your adjusted gross income plus tax-exempt interest (such as municipal bond interest) from two years ago. Your 2024 income determines your IRMAA in 2026. Your 2023 income determines your IRMAA in 2025.
What income is included in Magi for Medicare premiums? ›
MAGI is adjusted gross income (AGI) plus these, if any: untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest. For many people, MAGI is identical or very close to adjusted gross income. MAGI doesn't include Supplemental Security Income (SSI).
