Are you looking to sell your home soon? If so, the cost of your Medicare may be running through your mind. Will selling your home affect your Medicare costs? Will the income you make off of selling your home be considered taxable income? This article will discuss, if any, what costs you will have to think about and prepare for.
Income Related Monthly Adjustment Amount
So, where do people get the idea that the profit of selling their home will increase their Medicare costs? It stems from a Medicare system called the Income Related Monthly Adjustment Amount, also known as IRMAA.
IRMAA is when you make over a certain amount of income, and you must pay an additional cost to your Part B or Part D premium. IRMAA is calculated by your income tax returns from two years ago. For example, your Medicare premium in 2021 is determined by your 2019 tax income return. The amount is recalculated annually.
Will Selling Your Home Affect Your Medicare Costs?
Now that we have discussed IRMAA, let’s see if IRMAA is affected by selling your home. If you roll over the profit you made on selling your prior home into purchasing a new home, only the net amount of that sale gain would be taxable. In 2021, if you are married and your joint income is above $176,000, you will be subject to extra charges. If you are single and your income exceeds more than $88,000, then you would be subject to additional changes.
Selling Your Home May Not Affect Your Premium
Fortunately, it is most likely that your home sale will not even affect your IRMAA enough to boost you up and charge you more. Most people who sell their homes are not affected by an increase in premium prices through IRMAA if they sell their final home. Your final home is when it is assumed that you won’t be using the profit from the sale into another house. Tax laws can often allow an exclusion on the sale of your final home.
Finding a Tax Professional or Financial Planner
It is always a good idea to speak with a tax professional or financial planner about your situation if you are wary of having excess income will affect IRMAA. Everyone’s situation is different, so consulting with a tax professional can help to determine if your situation will affect premium increases or not.
If you are charged an additional premium, you can choose to appeal the IRMAA amount and file for a reconsideration. This is if you think the amount that you are being charged is too much.
Also, suppose you’ve had a divorce, loss of income, or a qualifying life-changing event. In that case, you can file for a redetermination. If your appeal doesn’t get qualified, the increase would be for a year, and the premiums would return to normal after. Another option with a tax professional is receiving the payout for your profit over time rather than accepting the money all at once. Consider options with your tax professional or financial planner to make a plan.
When you know it’s getting close to the time to sell your home, you can begin to piece together if the profit you make off the house will affect an IRMAA premium increase. In some situations, you won’t be affected at all by the profit of your home. However, it’s always good to advise with a tax professional or financial planner to determine if you will be subject to an increase and what you can do about it.