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Old 01-19-2017, 07:57 AM
 
Location: Loudon, TN
5,768 posts, read 4,822,990 times
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Mathjak and luv4horses had a discussion in a previous thread about the timing of a property sale and how it spiked their Medicare premium because it caused their taxable income to be unusually high in the 2 years prior to age 65. We are planning a sale of rental property, but DH turns 65 in 2.5 years. I need to know if we should delay sale until he gets Medicare. I've read what I can find from SSA but it is still not clear to me how this premium increase works.

If our regular annual income makes us eligible for the lowest premium, but a one time sale of a property puts our modified AGI over the limits for one year, does the premium increase forever, or just for that one year?

Does SSA never look at the income again when it goes back down to the normal level?

What if we delay the sale until a year or less before Medicare eligibility, would that avoid the increased premium? I mean they look at the last year's tax return for the prior year. So if he becomes Medicare eligible in 2019, they will be looking at the return in 2018 for the 2017 income, correct? If so, could we just sell in 2018, and it won't affect the premium??

Reading the SSA pamphlet, it looks like we would not have any of the "life-changing" events which cause a reduction in income, just a return to our regular income.

Do they look at the capital gains as income or the entire sale price, or the sale price after realtor and other expenses, etc? This could affect which of the brackets of higher premium we would land in.

Thanks in advance for help on this...

Last edited by volosong; 01-19-2017 at 09:54 AM.. Reason: fixed typo in title
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Old 01-19-2017, 08:15 AM
 
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medicare looks at income 2 years prior when setting your yearly premium so once you are within two years of medicare it is going to effect you .

each year your premium is adjusted based on the last tax form filed , that would be the one two years ago since last year is not filed yet .

each year you are reset again to the new tax return .
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Old 01-19-2017, 08:28 AM
 
Location: OKLAHOMA
1,784 posts, read 3,615,163 times
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Except they haven't lowered our yet. Been two years since the higher income. You can call and get a nothing of information, go the social security office with no answer either. We each pay 190 a month for medicare.
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Old 01-19-2017, 08:31 AM
 
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we won an appeal on a technicality so ours was rolled back and what we paid refunded . we went up 300 a month just for my wife. i am not on medicare or our increase would have been 600 a month on top of the normal premium
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Old 01-19-2017, 08:47 AM
 
Location: Idaho
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The Shadow,

For more information about Medicare IRMAA (Income-Related Monthly Adjustment Amount) you should read this document. Note that the premiums are shown for 2016. 2017 premiums are higher.

https://www.ssa.gov/pubs/EN-05-10536.pdf

I retired in November 2015. My husband applied for Medicare part B and D in April 2016. His premiums were determined based on our 2014 income (specifically the MAGI in our 2014 tax form).

We submitted a SSA-44 (Medicare Income-Related Monthly Adjustment Amount - Life-Changing-Event) form showing expected 2016 reduction due to work stoppage.

The appeal was approved initially, but it was rejected after the IRS sent SS our 2015 income tax which we filed in October. This apparently rejection came in through a SS letter informing my husband that because he had underpaid 2016 premiums, the underpayment amount will be deducted from his very first SS payment in 2017! We called SS office and was told just to refile SSA-44 form. This was rejected again with instruction to send our amended 2015 income tax return to prove lower income!

We sent another SSA-44 form and a letter explaining that our 2015 income was high because the work stoppage occured late in the year and our 2016 income is lower than the assessed amount. The last SS letter rejected our appeal and instructed us to send in 2016 income tax form. At this point, we have no choice but to wait for all the tax documents to come in, file 2016 tax form asap and try to appeal before the SS 'deadline' which is set 2 months from the date which we received the rejection notice.

Back to your questions regarding when to sell the property, how the income is considered, I think that it does not make any difference whether you sell the property before or after the date your husband receive Medicare except the case when you sell the property before the 2 years look back period. So if you sell the property in 2017 and your husband does not apply for Medicare B/D until 2010, the income from the sale does not count since the premium will be based on 2018 income tax return.

Regarding what part of your property sale is considered income, it is based on tax law. The SS just use the MAGI (Modified Adjusted Gross Income) amount in income tax form you file 2 years ago to determine the IRMAA amount.
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Old 01-19-2017, 09:31 AM
 
Location: Loudon, TN
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I read the SSA publication listed in the previous post, but it didn't answer my specific questions that I asked in the OP. Mathjak says it resets every year to your newest tax return, but Debbie says in the next post that they have not been reset at the lower level yet. The SSA publication didn't say anything at all about them looking at it annually, just that they looked at the previous year's return for the year prior to that one. Obviously we will have to report the income, but it is going to blow us out of the water by more than tripling our annual income for that one year. We are already retired, so we can't claim any of the approved "life change" exemptions. I'm really worried that we'll get stuck with high premiums for many years.
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Old 01-19-2017, 09:41 AM
 
796 posts, read 776,121 times
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I was not aware that selling a home could affect your Medicare and Part D premiums. I am planning on selling my home in one to two years.


Since the OP is selling a rental property I believe that is different from selling your primary residence. With a primary residence isn't there a tax exemption of $250,000 (for a single person) on any capital gains? Any profit I make wouldn't be near that. Am I right in assuming that with the exemption I wouldn't have to worry about any Medicare premium changes?
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Old 01-19-2017, 10:55 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
29,749 posts, read 54,373,866 times
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Quote:
Originally Posted by dj10 View Post
I was not aware that selling a home could affect your Medicare and Part D premiums. I am planning on selling my home in one to two years.


Since the OP is selling a rental property I believe that is different from selling your primary residence. With a primary residence isn't there a tax exemption of $250,000 (for a single person) on any capital gains? Any profit I make wouldn't be near that. Am I right in assuming that with the exemption I wouldn't have to worry about any Medicare premium changes?
Yes, there is an exemption for sale of the primary home for $250k/single and $500k/married and it's also used for medicare rates. I looked into this because it will affect us in a few years with an expected "profit" on the sale of our home being over $400k, so we may squeak by. The good news is that if your proceeds exceed that, they review your IRS tax filings every year, so the higher rate (about $100/month) is only for that one year after the sale and would then drop back down.
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Old 01-19-2017, 01:51 PM
 
249 posts, read 196,821 times
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Quote:
Originally Posted by Hemlock140 View Post
Yes, there is an exemption for sale of the primary home for $250k/single and $500k/married and it's also used for medicare rates. I looked into this because it will affect us in a few years with an expected "profit" on the sale of our home being over $400k, so we may squeak by. The good news is that if your proceeds exceed that, they review your IRS tax filings every year, so the higher rate (about $100/month) is only for that one year after the sale and would then drop back down.
This year our one time higher rate is $269.50 per person, jointly we pay $539 per month every month for 2017. Not complaining just stating the fact that higher income retirees do pay more for medicare coverage.

We are now negotiating to sell a property, the buyer has offered 1/3 now, 1/3 2018 and 1/3 2019. My first thought was ugh more medicare adjustments. The offer is generous so I will accept paying more medicare.

My long goal is to lower our annual income to avoid IRMMA.
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Old 01-19-2017, 02:09 PM
 
Location: Florida
4,355 posts, read 3,689,532 times
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I would not let taxes guide me on when to sell real estate. You could lose more by delaying the sale than the medicare tax.

However you can file an appeal and state that your current years income is under the threshold.

I think retirement works as a reason to file. But no matter what the rules say I would file the appeal and see what happens.
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