Will capital gains affect my 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.
Fortunately, the IRS allows homeowners who sell their primary residence to exclude up to $250,000 of the gain from their income ($500,000 if married filing jointly). Exempt capital gains do not count toward MAGI income, so they do not affect Medicare premiums.
If you must pay higher premiums, we use a sliding scale to calculate the adjustments, based on your “modified adjusted gross income” (MAGI). Your MAGI is your total adjusted gross income and tax-exempt interest income.
What Happens to My Medicare if I Sell My House? Selling your home could lead to higher Medicare premiums if your taxable income sees a boost. Although your Medicare benefits shouldn't change when you sell your home, your monthly premiums may. It depends on whether the sale of your home affects your taxable income.
Key Takeaway: IRMAA isn't a random calculation. It's influenced by your gross income, filing status, and even dividends or capital gains you make.
It's important to note that while capital gains can increase one's adjusted gross income (AGI), they are not subject to Social Security taxes. However, a higher AGI from capital gains can potentially lead to a higher portion of Social Security benefits being taxable.
So, the SSA looks at your 2022 tax returns to see if you must pay an IRMAA in 2024. For 2024, beneficiaries whose 2022 income exceeded $103,000 (individual return) or $206,000 (joint return) will pay a total premium amount ranging from $244.60 to $594.00 depending on income.
- If you pay your Part B premium through Social Security, the Part B Giveback will be credited monthly to your Social Security check.
- If you don't pay your Part B premium through Social Security, you'll pay a reduced monthly amount directly to Medicare.
Medicare looks at your modified adjusted gross income as reported 2 years prior on your IRS tax returns. For example, if you enroll in Medicare in 2024, the MAGI from your 2022 tax return will be the amount used to determine whether you will pay the IRMAA for 2024.
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 assets are counted for Medicare?
Assets are resources such as savings and checking accounts, stocks, bonds, mutual funds, retirement accounts, and real estate.
Capital gains do not affect Social Security benefits.
Capital gains and other kinds of income- rental payments, inheritances, pensions, interest, or dividends—do not reduce your Social Security payments. So, selling investment property may leave you with a tax bill but won't affect your SSA benefits.
A higher premium means a lower monthly payment from Social Security. This would only be temporary, however, as the lookback period is your tax return from two years ago. So if you were to receive an inheritance in 2022, for instance, that could affect the Medicare Part B premiums you pay for 2024.
Short-term capital gains are profits you earn on any asset you've owned for less than 1 year. Typically, these gains are added to your taxable income for the year. The amount of tax you owe is based on your marginal income bracket for that year, which is broken down into seven varying tax rates from 10% to 37% in 2023.
Unearned income includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, cancellation of debt, and distributions of unearned income from a trust.
While all capital gains are taxable and must be reported on your tax return, only capital losses on investment or business property are deductible.
Do 401k withdrawals count as income for Medicare? The Medicare Part B Premium charged by the government changes based on your income. Taking tax-free Roth withdrawals won't affect this Medicare premium. But the distributions you take from traditional IRAs count as income for your Part B Premium.
When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net earnings if you're self-employed. We include bonuses, commissions, and vacation pay.
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
No, most seniors pay between $175 and $371 per month depending on what kinds of Medicare coverage they buy. However, seniors who have a low income can qualify for free or reduced-cost Medicare.
What are the income limits for Medicare Part B in 2024?
| Beneficiaries who file an individual tax return with income: | Beneficiaries who file a joint tax return with income: |
|---|---|
| Less than or equal to $103,000 | Less than or equal to $206,000 |
| Greater than $103,000 and less than or equal to $129,000 | Greater than $206,000 and less than or equal to $258,000 |
Your Medicare premiums for a given year are calculated using your tax return from two years prior. For example, your 2024 Part B and Part D premiums are based on your 2022 tax return.
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.
There are a few scenarios where your Social Security benefits and Medicare premium deduction could stop entirely: You (or your spouse) returned to work and had Social Security payments suspended. Your disability benefits ended due to medical recovery or income limits.
Yes, if you've paid more than the standard Medicare Part B premium, an IRMAA refund can be applied for.
