Last year, we finally sold our previous home which had been turned into a rental property. Imagine our surprise when we just received a letter from the Social Security Administration informing us that our Medicare Part B deductions were doubling in 202! Yep, there is an income catch that few people know about.
If your annual income increases because of the sale of a rental property, your home or other major investment, then your federal Tax Return Adjusted Gross Income is likely to have a one-time dramatic increase. This doesn’t impact your Social Security income, but you could be crushed by a dramatic increase in Medicare Part B premiums based on “Income-Related Monthly Adjustment Amounts (IRMAA) for the year after next.
For example, we sold our property in the fall of 2019, paid off some bills and put the rest into savings. Now, we just received our annual notice from the Social Security Administration. As always, we expected a modest increase in our 2021 monthly payments. Imagine our surprise when we discover each of us was going to receive about $300 less each month! Didn’t see that one coming…I guess the good news is that our Medicare Part B deductions should revert back to normal levels in 2022 since we do not intend to sell any more large investments.
You can perhaps benefit from our punishing experience by discussing this issue with an accountant prior to submitting your 2020 taxes if you disposed of a major asset during this year. Maybe there is a way to mitigate the pain.
Learn More About this Medicate Part B Trap
Here are some quick reads that will bring you up to speed on this issue: