Our Medicare costs are rising because of home sale. What can we do?

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Q. Our income went up enough from a sale of a house in 2021 that our 2023 Medicare premiums may be more than $500 a month. Do you know if an appeal has a chance of being successful because this was a unique event?
— Taxpayer

A. Congratulations on your home sale last year.

As you noted, the increased income for the year matters for Medicare.

There’s a surcharge called, IRMAA, short for Income-Related Monthly Adjustment Amount, that’s applied to Medicare Part B and Part D premiums if your income is over certain thresholds, said Kelly Henning, a certified financial planner with Modera Wealth Management in Westwood.

She said Medicare looks at your tax returns from two years prior to determine your premiums for Part B and Part D.

“For 2022 Medicare premiums, IRMAA goes into effect for your 2022 premiums if your modified adjusted gross income (MAGI) on your 2020 tax returns is over these thresholds,” she said.

You are correct that your 2021 income will be used to determine your 2023 Medicare premiums, she said.

There is a form called the SSA-44, which can be filed if you have a life-changing event that could warrant a reduction in the amount of IRMAA applied to your Medicare Part B and D premiums, she said.

“The most common life-changing event that this form is applicable for is retirement or `work stoppage,’” she said. “Other life-changing events on the form are marriage, divorce/annulment, death of your spouse, work reduction, loss of income-producing property, loss of pension income and employer settlement payment.”

Unfortunately, the form does not note one-time large increases in income, like a home sale, Roth Conversion or high investment capital gains, Henning said.

“The most important step to take is to make sure that for your 2024 premiums, your IRMAA is reduced based on your 2022 income,” she said. “Your 2023 IRMAA surcharges will be a big hit for next year, but the good news is that this is a one-year event.”

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This story was originally published on Oct. 24, 2022.

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